Bonds dated June 1 with a face value of $100, 000 that are issued for $99, 400 on June 1 have a stated interest rate
A)that is more than the yield rate
B)that is less than the yield rate
C)that is equal to the yield rate
D)that may be more or less than the yield rate, but there is not enough information given to determine which

Question

Quizplus · Accepted Answer

When a bond is issued for less than its face value, it is said to be issued at a discount. This implies that the effective interest rate on the bond is higher than the stated interest rate, which is the rate printed on the face of the bond. Therefore, the stated interest rate is lower than the yield rate.

Bonds Dated June 1 with a Face Value of $100