A bond is issued at $1,000 par value during a time in which interest rates for similar bonds were 8%.Today,new bonds with similar creditworthiness are issued at 10%.Which of the following is most likely to be true about the bond?

Question

Quizplus · Accepted Answer

Since the current interest rates have increased from 8% to 10%, the bond's coupon rate is lower than the current market rate, making the bond less attractive and thus worth less than its par value. Therefore, the bond is likely to be selling at a discount.

A Bond Is Issued at $1,000 Par Value During a Time