Which of the following statements is true of a bond that is issued at a premium?
A)The bond will be issued at an amount above face value.
B)The stated interest rate is lower than the prevailing market interest rate.
C)At maturity,the bond will repay an amount that is greater than the face value.
D)The bond will be issued at par.

Question

Quizplus · Accepted Answer

A bond issued at a premium means that the market interest rate is lower than the stated interest rate. As a result, investors are willing to pay more than the face value of the bond to receive the higher stated interest rate. Therefore, the bond will be issued at an amount above face value. At maturity, the bond will repay the face value, not an amount greater than the face value. A bond issued at par means that it is issued at its face value.

Which of the Following Statements Is True of a Bond