When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.

Name: When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.
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When the market rate of interest is less than the contract rate for a bond, investors will be willing to pay more for the bond than its face value in order to receive the higher fixed interest payments. This results in the bond selling for a premium.

When the Market Rate of Interest Is Less Than the Contract