Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000.It is apparent that the bonds had a:
A)stated interest rate less than the market rate.
B)stated interest rate greater than the market rate.
C)effective interest rate less than the stated rate.
D)effective interest rate greater than the market rate.

Question

Quizplus · Accepted Answer

When bonds are sold at a price higher than their face value, it indicates that the stated interest rate on the bonds is higher than the market interest rate at the time of the sale. This makes the bonds more attractive to investors, leading to a premium sale.

Bonds with a Face Value of $200,000 Were Sold at an Effective