When the market rate exceeds the stated or nominal rate, a bond's carrying value will be less than its fair value.

Question

Quizplus · Accepted Answer

When the market rate exceeds the stated or nominal rate, a bond will be issued at a discount, meaning its carrying value (or book value) is initially less than its face value, not necessarily its fair value. Fair value is determined by the market and can fluctuate independently of the bond's carrying value.

When the Market Rate Exceeds the Stated or Nominal Rate