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27 September, 16:20

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 interest rate.

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Answers (1)
  1. 27 September, 18:23
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    b. market interest rate is higher than the contractual interest rate.

    Explanation:

    A bond sold at a price below its face value is said to be issued at a discount. An investor pays a price that is lower than they will claim at maturity. For example, a bond with a face value of $ 1000 and trades at $ 950 is trading at a discount.

    Bonds are issued at a discount when the prevailing market interest rate is higher than the interest rate the bond is offering. A bond interest rate or coupon rate defines its attractiveness to investors. If the coupon rate is higher than the market rate, the bond will be in great demand. But if the coupon rate is lower than the market, the bond will be less attractive to investors. In such a scenario, the bond is issued at a discount to attract investors.
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Home » Business » 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.
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