If Bonds Are Issued at a Discount, It Means That

question 131

Multiple Choice

If bonds are issued at a discount, it means that the

• A) financial strength of the issuer is suspect.
• B) market interest rate is higher than the contractual interest rate.
• C) market interest rate is lower than the contractual interest rate.
• D) bondholder will receive effectively less interest than the contractual rate of interest.

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Definitions:

Threshold Method

A technique used in various fields, including psychology and neuroscience, to determine the point at which a stimulus is strong enough to be detected or produce a response.

Noise

Unwanted or distracting sounds that can interfere with communication or concentration.

Guthrie

An American psychologist who proposed the theory of contiguity, suggesting that learning occurs when a stimulus and response occur close together in time.