A $30,000 bond issue with a stated interest rate of 5%, when the market rate of interest is 6%, means that the bond will sell for:

Question

Quizplus · Accepted Answer

When the stated interest rate is lower than the market rate, the bond will sell for less than its face value. This is because investors will require a higher return on their investment and will only be willing to pay a lower price for the bond. Therefore, the bond will sell for less than $30,000 in order to compensate for the difference in interest rates.

A $30,000 Bond Issue with a Stated Interest Rate of 5