IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2022.If interest rates fall in the economy so that similar financial investments pay 5%,IBM will:
A)not be able to issue the bonds because no one will buy them.
B)receive a higher issue price as buyers compete for the bonds.
C)have to accept a lower issue price to attract buyers.
D)have to reprint the bond certificates to change stated interest rate to 5%.

Question

Quizplus · Accepted Answer

When interest rates in the economy fall below the stated interest rate of a bond, the bond becomes more attractive, leading to a higher issue price as buyers are willing to pay more for the higher interest rate.

IBM Is Planning to Issue $1,000 Bonds with a Stated