Bonds with a 7% stated interest rate were issued when the market rate of interest was 6%.This bond was issued at:
A)par value.
B)a premium.
C)a discount.
D)face value.

Question

Quizplus · Accepted Answer

When the stated interest rate on a bond is higher than the market rate of interest, the bond is considered to be issued at a premium. This is because investors are willing to pay more for a bond that offers a higher interest rate than what is currently available in the market. In this case, the bond has a stated interest rate of 7%, which is higher than the market rate of 6%. Therefore, the bond was issued at a premium.

Bonds with a 7% Stated Interest Rate Were Issued When