Question

A bond issue with a face amount of $1,100,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is:

Answer 1

Answer:

d. Less than $1,100,000

Explanation:

Here are the options

Equal to $100,000 O

O More than $100,000 o

O The answer cannot be determined from the information provide

d. Less than $1,100,000

If the current interest market rate is greater than the bonds coupon rate the bond is selling at a discount

If the current interest market rate is less than the bonds coupon rate the bond is selling at a premium

If a bond’s coupon rate is equal to its current interest market rate, then the bond is selling at par.