If a bond has a stated rate of interest of 6%, but the market rate of interest is 8%, the bond
A) will sell at a discount.
B) will sell at a premium.
C) may sell at either a premium or a discount.
D) will sell at its face value.

Question

Quizplus · Accepted Answer

When the market rate of interest is higher than the stated rate of interest on a bond, the bond is less attractive to investors and will likely sell at a discount. This is because investors can earn a higher rate of return by investing in other bonds with higher rates of interest.

If a Bond Has a Stated Rate of Interest of 6