When the market rate of interest is less than the contract rate of interest, the bonds will sell
A) below face value.
B) at a discount.
C) behind par value.
D) at a premium.

Question

Quizplus · Accepted Answer

When the market rate of interest is lower than the contract rate of interest on bonds, investors are willing to pay more for the bonds because they offer a higher return than what is currently available in the market. Therefore, the bonds sell at a premium.

When the Market Rate of Interest Is Less Than the Contract