When the market rate of interest is in excess of the stated rate of interest,a bond will be sold at a premium.

Question

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When the market rate of interest is in excess of the stated rate of interest, a bond will be sold at a discount, not a premium. This is because investors are more interested in newer bonds that offer higher interest rates, causing the value of older bonds to decrease. As a result, issuers of older bonds may offer them at a discount to attract investors. Conversely, when the market rate of interest is below the stated rate of interest, a bond will be sold at a premium as investors are willing to pay more for an opportunity to earn higher interest payments.

When the Market Rate of Interest Is in Excess of the Stated