When the market rate of interest on the date bonds are issued is lower than the face rate of interest on the bonds:
A)the proceeds from the issuance of the bonds will be less than the face value of the bonds
B)the bonds are issued at a premium
C)the bonds are issued at a discount
D)both a and c are correct

Question

Quizplus · Accepted Answer

When the market rate of interest is lower than the face rate of interest on the bonds, the bonds are issued at a premium because investors are willing to pay more for a higher interest rate than what is currently available in the market.

When the Market Rate of Interest on the Date Bonds