QuestionJune 27, 2025

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a. a discount b. a premium c. their face value d. their maturity value

When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at a. a discount b. a premium c. their face value d. their maturity value
When the market rate of interest on bonds is higher than the contract rate, the bonds will sell at
a. a discount
b. a premium
c. their face value
d. their maturity value

Solution
4.2(232 votes)

Answer

a. a discount Explanation 1. Compare Market and Contract Rates When the market rate of interest is higher than the contract rate, investors will not be willing to pay full price for the bonds since they can get better returns elsewhere. 2. Determine Bond Selling Price Bonds will sell at a discount because the lower contract rate makes them less attractive compared to current market rates.

Explanation

1. Compare Market and Contract Rates<br /> When the market rate of interest is higher than the contract rate, investors will not be willing to pay full price for the bonds since they can get better returns elsewhere.<br /><br />2. Determine Bond Selling Price<br /> Bonds will sell at a discount because the lower contract rate makes them less attractive compared to current market rates.
Click to rate:

Similar Questions