Bonds sell at a premium when the market rate of interest is:
A) less than the bond's coupon rate.
B) greater than the bond's coupon rate.
C) equal to the bond's coupon rate.
D) None of the above is true.

Question

Quizplus · Accepted Answer

When the market rate of interest is less than the bond's coupon rate, investors are willing to pay more for the bond because it provides a higher yield than what is currently available in the market. This results in the bond selling at a premium.

Bonds Sell at a Premium When the Market Rate of Interest