If the market interest rate is greater than the contractual interest rate bonds will sell
A) at a premium.
B) at face value.
C) at a discount.
D) only after the stated interest rate is increased.

Question

Quizplus · Accepted Answer

If the market interest rate is greater than the contractual interest rate, investors will demand a higher return on their investment. This means the bond's face value will need to be discounted in order to provide investors with a higher yield. Therefore, the bonds will sell at a discount.

If the Market Interest Rate Is Greater Than the Contractual