When a bond sells at less than 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 less than its face amount, it is said to be selling at a discount. This happens when the market rate of interest is greater than the bond's stated rate of interest. Investors can purchase the bond at a lower price, but the interest payments they receive will be based on the lower stated rate, resulting in a higher yield on their investment.

When a Bond Sells at Less Than Its Face Amount,the