The present value of a $10,000, 5-year bond, will be less than $10,000 if the

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When the market interest rate is higher than the contractual interest rate, the present value of the bond decreases, as investors can earn a higher return elsewhere. Therefore, the price of the bond will be less than $10,000. Conversely, if the contractual interest rate is higher than the market interest rate, the bond will be more valuable, and its price will be greater than $10,000. When the contractual interest rate is equal to the market interest rate, the bond's present value equals its face value. The bond being convertible is irrelevant in this scenario.

The Present Value of a $10,000, 5-Year Bond, Will Be