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Which of the following occurs when a bond's stated interest rate is higher than the market interest rate? The bond will be issued at a premium
Which of the following occurs when a bond's stated interest rate is higher than the market interest rate?
-
- The bond will be issued at a premium.
- The bond will be issued at maturity value.
- The bond will be issued at a discount.
- The bond will be issued at par.
Expert Solution
Answer:
a .
Step-by-Step explanation
Option A is the correct answer.
When the bond's stated interest rate is higher than the market interest rate then the bond shall be issued at a premium.
As the issuer of the bond shall pay a higher interest rate as compared to the market , therefore the bond shall be issued at a premium.
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