If a company sells its bonds at face value, the effective interest rate is
A)lower than the contract interest rate
B)higher than the contract interest rate
C)equal to the contract interest rate
D)higher than the market interest rate

Question

Quizplus · Accepted Answer

If a company sells its bonds at face value, meaning they sell the bonds for the exact amount stated on the bond, then the effective interest rate will be equal to the contract interest rate. This is because there is no discount or premium involved in the sale of the bonds.

If a Company Sells Its Bonds at Face Value, the Effective