If a bond is sold at 98,its stated rate of interest would be which of the following?
A)Lower than the market rate.
B)Higher than the market rate.
C)Equal to the market rate.
D)Unrelated to the market rate.

Question

Quizplus · Accepted Answer

When a bond is sold below par value (such as 98), it means that its yield or effective interest rate is higher than its stated interest rate. This is because the buyer is paying less than the face value for the bond but will still receive interest payments based on the face value. Therefore, the stated rate of interest would be lower than the market rate.

If a Bond Is Sold at 98,its Stated Rate of Interest