Asked by
Emily Lupercio
on Nov 13, 2024
Verified
If bonds are issued at a discount, it means that the
A) bondholder will receive effectively less interest than the contractual rate of interest
B) market interest rate is lower than the contractual interest rate
C) market interest rate is higher than the contractual interest rate
D) financial strength of the issuer is suspect
Contractual Interest Rate
The interest rate specified in a loan agreement or bond indenture.
Issued Discount
A reduction from the nominal or face value of a security at the time it is issued.
- Perceive the fiscal ramifications of offering bonds at their nominal value, at a reduced price, or at an increased price.
- Understand the impact of market interest rates on bond valuation.
Verified Answer
OV
Learning Objectives
- Perceive the fiscal ramifications of offering bonds at their nominal value, at a reduced price, or at an increased price.
- Understand the impact of market interest rates on bond valuation.