The price of previously issued bonds and the interest rate are inversely related. When the interest rate decreases, the return to previously issued bonds increases. This will make bonds more attractive, their demand will increase, and thus their price will also increase.

The Par value of the bond is different from the price of the bond. Par value is the “face value” of the bond. This is the amount that a bond issuer has agreed to pay the bondholder at some point in the future. This amount is set in advance and does not change in response to changes in interest rates or any other change in macroeconomic variables.

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