On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.These bonds sold at 98 because ________.

Question

Quizplus · Accepted Answer

The bonds were sold at a discount because the stated interest rate (8%) was lower than the market rate of interest at the time of issuance. When the market demands a higher rate of return than what a bond is offering, the bond's price must be discounted in order to attract investors.

On December 31,IOU Corporation Issued $100,000 of 10-Year,8% Bonds at 98.The