If the market rate of interest is lower than the stated rate, bonds will sell at an amount:
A) equal to face value.
B) not determinable from the given information.
C) lower than face value.
D) higher than face value.

Question

Quizplus · Accepted Answer

When the market rate of interest is lower than the stated rate on a bond, the bond offers a more attractive return compared to current market conditions. Therefore, investors are willing to pay more for the bond, leading it to sell at a premium, or an amount higher than its face value.

If the Market Rate of Interest Is Lower Than the Stated