If Bonds Are Issued at a Premium, the Stated Interest

question 41

Multiple Choice

If bonds are issued at a premium, the stated interest rate is

• A) higher than the market rate of interest
• B) lower than the market rate of interest
• C) too low to attract investors
• D) adjusted to a higher rate of interest

---

Definitions:

Discount Rate

The discount rate, in finance, is the interest rate used to determine the present value of future cash flows, influencing the attractiveness of investments.

Perpetuity

A financial instrument that provides a stream of indefinite cash flows, or payments, with no end date.

Interest Rate

Interest rate is the proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

Nominal Rate

The stated interest rate on a loan or investment, not accounting for inflation or compounding of interest.