When a bond sells at its face amount,the market rate of interest is ________.
A)equal to the bond's stated rate of interest
B)greater than the bond's stated rate of interest
C)less than the bond's stated rate of interest
D)irrelevant to investors

Question

Quizplus · Accepted Answer

When a bond sells at its face amount, it means the selling price is equal to the bond's stated value, which is the value of the bond at maturity. At this point, the market rate of interest must be equal to the bond's stated rate of interest because investors are willing to buy the bond at face value, which is what they receive at maturity. Therefore, the market rate of interest is not greater or less than the bond's stated rate of interest but rather equal to it.

When a Bond Sells at Its Face Amount,the Market Rate