Issuing bonds payable when the market interest rate is less than the stated interest rate:
A)results in bonds being issued at a premium.
B)results in bonds being issued at less than their face value.
C)raises the effective interest rate above the stated rate of interest.
D)results in bonds being issued at a premium and the effective interest rate is higher than the stated rate.

Question

Quizplus · Accepted Answer

When the market interest rate is less than the stated interest rate, bonds are issued at a premium because investors are willing to pay more for the higher interest payments.

Issuing Bonds Payable When the Market Interest Rate Is Less