If the market interest rate is 4.5%, a $100,000, 5.6%, 10-year bond that pays interest semi-annually would sell at an amount
A)less than face value.
B)equal to the face value.
C)greater than face value.
D)that cannot be determined.

Question

Quizplus · Accepted Answer

When the coupon rate (5.6%) of a bond is higher than the market interest rate (4.5%), the bond sells at a premium, meaning it sells for more than its face value. This is because the bond's payments are more attractive compared to the current market rates, making investors willing to pay more for the bond.

If the Market Interest Rate Is 4