Impact of Interest Rate Changes on Bond Prices

In the context of the bond markets, understanding the relationship between interest rates and bond prices is crucial. When interest rates rise, the prices of existing bonds typically fall. This inverse relationship is a fundamental concept in fixed income securities.

Now, consider a bond that pays a fixed annual coupon rate of 5% and has a face value of $1,000. If market interest rates increase to 6%, what will happen to the price of this bond?