A corporate bond with a face value of $1,000 is issued at 107. This means that the bond actually sold for:
A) $107 dollars, and the stated interest rate was higher than the market interest rate.
B) $1,070 dollars, and the stated interest rate was higher than the market interest rate.
C) $107 dollars, and the stated interest rate was lower than the market interest rate.
D) $1,070 dollars, and the stated interest rate was lower than the market interest rate.

Question

Quizplus · Accepted Answer

A bond issued at 107 means that the bond is being issued at 107% of its face value, which is $1,000 in this case. Therefore, the bond was sold for $1,070 ($1,000 x 107%). If the stated interest rate is higher than the market interest rate, it means the bond is more attractive to investors and can be sold at a premium.

A Corporate Bond with a Face Value of $1,000 Is