Bond prices refer to the amount of money an investor pays to purchase a bond, which is a type of debt security issued by entities like governments or corporations. The price of a bond can fluctuate based on various factors, including interest rates, the creditworthiness of the issuer, and overall market conditions. When interest rates rise, existing bond prices typically fall, as new bonds are issued at higher rates. Investors buy bonds for regular interest payments, known as coupon payments, and the return of the principal amount at maturity. The relationship between bond prices and interest rates is crucial for understanding how the bond market operates. A bond's price can also be influenced by changes in inflation and economic outlook, affecting investor demand.