When the market rate of interest is equal to the contract rate of interest, the bonds should sell at
A) a premium.
B) par value.
C) the call price.
D) the conversion price.

Question

Quizplus · Accepted Answer

When the market rate of interest is equal to the contract rate of interest, bonds sell at their par value because the return they offer is exactly what investors can expect to earn based on current market conditions.

When the Market Rate of Interest Is Equal to the Contract