Question

Why is it so important for investors to understand the relationship between bond prices and interest yields? How will that impact their decision making?

Answer 1

There is an inverse relationship that exists between bond prices and interest yields. Falling interest yields make bond prices rise conversely, rising interest yields cause bond prices to fall,

If any bond investor expects that in the future that the interest yields likely to fall, he buys that expecting the bond prices to raise. conversly,  if he forsees any interest yields to raise, he sells that expecting the bond prices to fall.