If the market rate of interest is 5%, a $10,000, 6%, 10-year bond that pays interest semi-annually would sell at an amount
A) less than face value.
B) equal to the face value.
C) greater than face value.
D) that cannot be determined.

Question

Quizplus · Accepted Answer

Since the bond's coupon rate (6%) is higher than the market interest rate (5%), it will sell at a premium, meaning for an amount greater than its face value. This is because investors are willing to pay more for a bond that offers a higher return than the current market rate.

If the Market Rate of Interest Is 5%, a $10,000