What sets the selling price of a bond?

The selling price of a bond is determined by the yield to maturity (YTM). This is the rate of return a bondholder can expect to receive if the bond is held to maturity. The YTM is calculated from the bond’s coupon rate, its face value, the current market interest rate, and the number of years remaining until expiration. As interest rates increase, the demand for a bond decreases, causing its price to decrease, and vice versa when interest rates are low. Generally, the higher the coupon rate, the higher the bond price; the lower the coupon rate, the lower the bond price.