Which of the following statements is TRUE of a bond that is issued at a discount?
A) The bond will be issued at par.
B) The stated interest rate is higher than the prevailing market interest rate.
C) At maturity, the bond will repay an amount that is less than the face value.
D) The bond will be issued for an amount less than the face value.

Question

Quizplus · Accepted Answer

A bond issued at a discount means that it is issued for less than its face value (also called par value). At maturity, the bond will still repay the face value, so the bondholder will earn a profit. The stated interest rate may be higher or lower than the prevailing market rate, depending on various factors like credit risk and time to maturity.

Which of the Following Statements Is TRUE of a Bond