Interest rates are measure of risk. Higher interest rates are appropriate for riskier bonds, while lower interest rates would apply to less risky bonds.

If it helps, think of it this way: you're going to apply a higher interest rate to a riskier bond because of the larger uncertainty surrounding the payment of interest over life+principal at the end, right? With a higher interest rate, you're more likely to at least recoup your initial investment in the event of, say, a default.

If you're asking about the effect of fluctuating interest rates over the life of the bond, then it works as follows. If you purchase a bond@8% , and interest rates on similar bonds fall to 6% sometime later, your bond is now at a premium, since the company will be floating bonds at the market rate of 6% while paying 8% on your outstanding bond; therefore, you will get more than face value for this bond.

Conversely, if your bond is paying 8% and the market rate is 10%, this would lower the value of your bond, since similar bonds pay more interest than your outstanding bond. Therefore you should expect to get less than face value for the bond. In this case, your bond would sell at a discount.

Hope that helps!