If the market interest rate is higher than the coupon rate on a newly issued bond, then the bond will sell

Question

Quizplus · Accepted Answer

When the market interest rate is higher than the coupon rate, the bond's fixed interest payments are less attractive compared to the new bonds issued at the current higher rates. Therefore, the bond's price drops below its face value (par) to compensate investors for the lower coupon payments, making it sell below par.

If the Market Interest Rate Is Higher Than the Coupon