A bond with an annual coupon payment of $100 originally sold at par for $1,000. Market interest rates are currently 12%. This bond would be selling at a ____ in order to compensate ____.

A) premium; the purchaser for the below market coupon rate
B) discount; the purchaser for the below market coupon rate
C) premium; the seller for the below market coupon rate
D) discount; the seller for the below market coupon rate

Market Interest Rates

The prevailing rates at which borrowers can obtain loans and lenders can earn interest in the financial markets, influenced by monetary policy, market demand, and economic conditions.

Premium

An amount paid in addition to a standard rate or principal, often associated with insurance policies or bond prices over par value.

Discount

A reduction applied to the price of goods, services, or securities, either for promotional purposes or to reflect the present value of future cash flows.