Can anyone give me an example of how the bond price is inverse to the interest rate?

Answer 1

Basic economic law: As interest rates goes up, price of bonds fall. As interest rates goes down, price of bonds goes up.

Example:
A bond is bought for $10,000 for 5 years with 5% interest rate paid semiannually. Then interest rate rise to 6%. Who would want to buy a bond 1% below the market rate? Remember, your interest rate on your bond is fixed at 5%. So, if you wanted to sell it, the annual payment of $500 (10,000 x 5%) must equal to 6%.
Doing the math, the bond must be DISCOUNTED to $8,333 to match the 5% so that the $500 fixed payment equals to 6% yield on buyer's investment (8333 x 6% = $500).

Answer 2

Are you asking why bond prices decrease when interest rates rise? Here's an example:
Suppose you buy a bond for $100 that pays 5% annually. If interest rates rise to 6%, why would anyone buy your bond?
They could just buy a newly issued bond for $100 and get 6% interest. In order to compensate, you would have to lower the price of your bond to about $99.50 in order to attract a buyer for your bond.

Answer 3

If you buy a bond at 5.00%, and interest rates go up, people can now buy bonds yielding, say, 5.10%. Who wants yours? Nobody. Better put yours on sale , lowering the price, to attract buyers.