Use the present value and future value tables included in Appendix 8 and on the textbook companion website.
-The effective interest rate on bonds is higher than the stated rate when bonds sell

Question

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. 
-The effective interest rate on bonds is higher than the stated rate when bonds sell

Quizplus · Accepted Answer

When bonds sell below face value, it means they are sold at a discount, and the effective interest rate on bonds will be higher than the stated rate. This is because the bondholder is paying less than the face value but will still receive the full face value upon maturity, which means they are earning additional interest on the investment. Therefore, the effective interest rate will be higher than the stated rate.

Use the Present Value and Future Value Tables Included in Appendix