If the market rate of interest is
A) equal to the stated rate, the bond will sell at a discount.
B) equal to the stated rate, the bond will sell at a premium.
C) greater than the stated rate, the bond will sell at a discount.
D) greater than the stated rate, the bond will sell at premium.
E) less than the stated rate, the bond will sell at a par.

Question

Quizplus · Accepted Answer

When the market rate of interest is greater than the stated rate, the bond will sell at a discount because investors can get a better return elsewhere, so the bond's price must decrease to offer a competitive yield.

If the Market Rate of Interest Is