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A bond issue with a face amount of $500,000 bears interest at the rate of 7%....

A bond issue with a face amount of $500,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is: Equal to $500,000. Less than $500,000. More than $500,000. The answer cannot be determined from the information provided.

Solutions

Expert Solution

When stated interest rate is higher than market interest rate then bond will be issued at premium but when stated interest rate is lower than market interest rate then bond will be issued at discount

So answer is b) Less than $500000

ekkarill92 answered 2 years ago
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