If a bond with a face value of $1,000 and a face interest rate of 7 percent is issued for $970,the market interest rate at the date of issuance must have been greater than 7 percent.

Question

Quizplus · Accepted Answer

When a bond is issued at a discount (i.e. for less than its face value), it means that the market interest rate is higher than the face interest rate. In this case, the bond was issued for $970, which is less than the face value of $1,000, indicating that the market interest rate was greater than the face interest rate of 7%.

If a Bond with a Face Value of $1,000 and a Face