Given the information below,which bond(s)will be issued at a discount? $$\begin{array} { | l | c | c | c | c | }
\hline & \text { Bond 1 } & \text { Bond 2 } & \text { Bond 3 } & \text { Bond 4 } \
\hline \begin{array} { l }
\text { Stated Rate of } \
\text { Return }
\end{array} & 5 \% & 7 \% & 12 \% & 10 \% \
\hline \begin{array} { l }
\text { Market Rate of } \
\text { Return }
\end{array} & 7 \% & 8 \% & 12 \% & 9 \% \
\hline
\end{array}$$

Question

Given the information below,which bond(s)will be issued at a discount? $$\begin{array} { | l | c | c | c | c | } 
\hline & \text { Bond 1 } & \text { Bond 2 } & \text { Bond 3 } & \text { Bond 4 } \
\hline \begin{array} { l } 
\text { Stated Rate of } \
\text { Return }
\end{array} & 5 \% & 7 \% & 12 \% & 10 \% \
\hline \begin{array} { l } 
\text { Market Rate of } \
\text { Return }
\end{array} & 7 \% & 8 \% & 12 \% & 9 \% \
\hline
\end{array}$$

Quizplus · Accepted Answer

Bonds are issued at a discount when the market rate of return is higher than the stated rate of return. For Bond 1, the market rate (7%) is higher than the stated rate (5%), and for Bond 2, the market rate (8%) is higher than the stated rate (7%). Therefore, both Bond 1 and Bond 2 will be issued at a discount.

Given the Information Below,which Bond(s)will Be Issued at a Discount