Asked by Vania Grace on Jun 05, 2024
Verified
A premium on bonds occurs when bonds carry a contract rate greater than the market rate at issuance.
Premium
A premium refers to the amount paid for buying insurance or the amount paid over the face value of bonds.
Contract Rate
The interest rate specified in a contractual agreement, such as in a loan or bond.
Market Rate
The prevailing interest rate available in the marketplace for instruments of similar risk and maturity.
- Acquire knowledge on the concepts and economic implications of selling bonds at a value higher or lower than their nominal price.
Verified Answer
NS
nazmeen shahbazJun 12, 2024
Final Answer :
True
Explanation :
A premium on bonds occurs when the contract rate is greater than the market rate, meaning that investors are willing to pay more than the face value of the bond to receive higher interest payments.
Learning Objectives
- Acquire knowledge on the concepts and economic implications of selling bonds at a value higher or lower than their nominal price.
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