When the market interest rate is equal to the stated rate of interest on bonds,the present value of the bonds will equal the bond's face value.

Question

Quizplus · Accepted Answer

This is because the present value of the bond is calculated by discounting the future cash flows (interest payments and principal repayment) using the market interest rate. When the market interest rate is equal to the stated rate of interest on bonds, the discount rate is the same as the coupon rate, resulting in the present value of the bond being equal to its face value.

When the Market Interest Rate Is Equal to the Stated