The market rate of interest on bonds equals the stated rate of interest if the bonds were sold at face value.

Question

Quizplus · Accepted Answer

When a bond is sold at face value, it means that the market rate of interest is the same as the stated rate of interest. This is because investors are willing to pay the full face value of the bond to receive the stated interest payments, which is equivalent to the market rate of interest. If the market rate of interest is higher than the stated rate, then the bond will be sold at a discount, and if it is lower, then the bond will be sold at a premium.

The Market Rate of Interest on Bonds Equals the Stated