If the Market Interest Rate Is Lower Than the Face

question 167

Multiple Choice

If the market interest rate is lower than the face interest rate at the date of issuance,bonds will

• A)not sell until the face interest rate is adjusted.
• B)sell at face value.
• C)sell at a discount.
• D)sell at a premium.

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Definitions:

Opportunity Cost

The act of selecting one alternative leads to the loss of possible gains that could have been obtained from other options.

Comparative Advantage

The ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others, leading to more efficient trade possibilities.

Absolute Advantage

The ability of a country or entity to produce a good more efficiently (using fewer resources) than another country or entity.

Economic Efficiency

A condition where resources are allocated in a way that maximizes the production of goods and services at the lowest cost to society.