If the market interest rate at the date of issuance of a bond exceeds the face interest rate,the present value of the face value plus the present value of all the future interest payments will equal an amount less than the face value of the bond.

Question

Quizplus · Accepted Answer

When the market interest rate exceeds the bond's coupon rate, the bond's present value, which includes the present value of its face value and future interest payments, will be less than its face value. This is because the bond's fixed interest payments are less attractive compared to the higher interest rates available in the market, leading to a discount on the bond's price.

If the Market Interest Rate at the Date of Issuance