If bonds are issued at a discount, it means that the
A) bondholder will receive effectively less interest than the contractual rate of interest
B) market interest rate is lower than the contractual interest rate
C) market interest rate is higher than the contractual interest rate
D) financial strength of the issuer is suspect

Question

Quizplus · Accepted Answer

When bonds are issued at a discount, it means the market interest rate is higher than the contractual interest rate. This causes the bonds to sell for less than their face value to make them more attractive to buyers, who can earn a higher return through the market's prevailing rates.

If Bonds Are Issued at a Discount, It Means That