Which of the following statements is TRUE about a bond that is issued at a premium? It will be sold above face value. Its interest rate lower than the prevailing market rate. It will repay principal at more than the face value. It will be sold at face value.

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Which of the following statements is TRUE about a bond that is issued at a premium? It will be sold above face value

Accounting Mar 19, 2021

Which of the following statements is TRUE about a bond that is issued at a premium?

1. It will be sold above face value.
2. Its interest rate lower than the prevailing market rate.
3. It will repay principal at more than the face value.
4. It will be sold at face value.

Expert Solution

Answer:

a .

Step-by-Step explanation

A bond trades at a premium if it offers a coupon rate higher than prevailing interest rates. Hence, a bond which issued at premium will be sold above par value or face value.

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