A bond sells at a discount when the:
A) Contract rate is above the market rate.
B) Contract rate is equal to the market rate.
C) Contract rate is below the market rate.
D) Bond has a short-term life.
E) Bond pays interest only once a year.

Question

Quizplus · Accepted Answer

A bond sells at a discount when the contract rate (also known as the coupon rate) is below the market rate. This means that the bond is offering a lower interest rate than what is currently available in the market, making it less attractive to investors. As a result, the bond will sell at a discount in order to compensate for the lower interest rate.

A Bond Sells at a Discount When The