If the Market Rate of Interest Is Greater Than the Contractual

question 135

Multiple Choice

If the market rate of interest is greater than the contractual rate of interest, bonds will sell

• A) at a premium
• B) at face value
• C) at a discount
• D) only after the stated rate of interest is increased

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Definitions:

Bank

A financial institution licensed to receive deposits, make loans, and offer various financial services, such as currency exchange and wealth management.

Compound Rate

The rate at which interest is earned on both the initial principal and the accumulated interest from previous periods.

Savings Account

An account in a bank or financial institution where the main amount is safe and earns a small amount of interest.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.