The Franklin Company issued a 6% bond three years ago at par value.The market interest rate on comparable bonds today is 5%.The Franklin Company bond currently pays ________ a year in interest and the bond sells at a ________.

Question

Quizplus · Accepted Answer

The bond pays $60 a year in interest (6% of the par value, assuming par value is $1,000). Since the market interest rate is now lower at 5%, the bond sells at a premium.

The Franklin Company Issued a 6% Bond Three Years Ago