When the contract rate on a bond issue is less than the market rate, the bonds sell at a discount.

Question

Quizplus · Accepted Answer

When the contract rate on a bond issue is less than the market rate, the bonds sell at a discount because investors are not willing to pay the full face value of the bond when they can earn a higher interest rate elsewhere. This creates a lower market price for the bond, resulting in it being sold at a discount.

When the Contract Rate on a Bond Issue Is Less