If the market interest rate is higher than the face interest rate at the date of issuance,bonds will
A) not sell until the face interest rate is adjusted.
B) sell at face value.
C) sell at a discount.
D) sell at a premium.

Question

Quizplus · Accepted Answer

When the market interest rate is higher than the face interest rate of bonds, investors will demand a higher yield from the bonds to compensate for the lower return compared to other investment options available in the market. As a result, the bonds will sell at a discount, meaning their market price will be lower than the face value.

If the Market Interest Rate Is Higher Than the Face