A $10,000 bond issue with a stated rate of interest of 7%,when the market rate of interest is 8%,means that the bond will be sold for:

Question

Quizplus · Accepted Answer

When the market rate of interest is higher than the stated rate of interest on a bond, the bond will be sold at a discount (less than its face value) in order to make it more attractive to investors. In this case, since the market rate is 8% and the stated rate is 7%, the bond will be sold at a discount to make up for the difference in interest rates. Therefore, the bond will be sold for less than $10,000.

A $10,000 Bond Issue with a Stated Rate of Interest