Suppose the prevailing market rate is 8 percent.A bond with a coupon rate of 6 percent will be sold at:

Question

Quizplus · Accepted Answer

A bond with a coupon rate of 6 percent will be sold at a discount because its coupon rate is lower than the prevailing market rate of 8 percent. Investors demand higher returns for investing in a bond with a lower coupon rate, which results in the bond being sold at a discount to make up for the difference in yield.

Suppose the Prevailing Market Rate Is 8 Percent