The interest rate that determines the amount of cash paid to the bondholder is referred to as the:

Question

Quizplus · Accepted Answer

The contract rate of interest is the rate set forth in the bond agreement between the issuer and the bondholder. This rate is used to calculate the amount of cash interest that the bondholder will receive. While the effective and market rates of interest may also be relevant to the bondholder, they are not the specific rate that determines the amount of cash paid.

The Interest Rate That Determines the Amount of Cash Paid