If a bond was sold at $108, the stated rate of interest was:
A)Equal to market rate.
B)Higher than market rate.
C)Not related to market rate.
D)Lower than market rate.

Question

Quizplus · Accepted Answer

When a bond is sold at a premium (above its face value, in this case, $108), it indicates that the stated rate of interest on the bond is higher than the prevailing market rate of interest. This makes the bond more attractive to investors, hence the higher selling price.

If a Bond Was Sold at $108, the Stated Rate