When the contract rate is above the market rate,a bond sells at a premium.

Name: When the contract rate is above the market rate,a bond sells at a premium.
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Question

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When the contract rate is higher than the market rate, investors are willing to pay more for the bond because the interest payments are higher than what is currently available in the market. As a result, the bond sells at a premium above its face value.

When the Contract Rate Is Above the Market Rate,a Bond