The market interest rate related to a bond is also called the
A) stated interest rate
B) effective interest rate
C) contract interest rate
D) straight-line rate

Question

Quizplus · Accepted Answer

The market interest rate related to a bond is also referred to as the effective interest rate. This is the rate that investors are demanding for similar securities in the market. It is determined by various factors like inflation, economic conditions, supply and demand, and the creditworthiness of the issuer. The stated interest rate is the rate that is printed on the bond certificate and is often fixed at the time of issuance. The contract interest rate is the rate that is agreed upon by the issuer and investor and is fixed for the duration of the bond's term. The straight-line rate is used to compute interest expense over the duration of the bond's term, but it is not related to market interest rates.

The Market Interest Rate Related to a Bond Is Also