If a Bond's Stated Interest Rate Is Lower Than the Market

question 49

Multiple Choice

If a bond's stated interest rate is lower than the market rate,which of the following is true?

• A)The bond will be issued at a premium.
• B)The bond will be issued at par.
• C)The bond will be issued at a discount.
• D)The bond will be issued for an amount higher than the maturity value.

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Definitions:

Profit

The earnings obtained when the income generated from business operations is higher than the expenses, costs, and taxes required for these operations.

Output Market

Marketplaces where finished goods or services are sold to consumers, as opposed to input markets where raw materials are bought.

Consumers

Individuals or entities that purchase goods or services for personal use, not for manufacture or resale.

Firms

Business entities that produce goods or provide services with the aim of making a profit.