If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

A) less than face value
B) equal to the face value
C) greater than face value
D) that cannot be determined

Question

Benedek Molnár · Accepted Answer

Final Answer : C, Explanation :  Since the bond's coupon rate (12%) is higher than the market interest rate (10%), it will sell for more than its face value. Investors are willing to pay a premium for a bond that offers a higher return than the prevailing market rate.

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

A) less than face value
B) equal to the face value
C) greater than face value
D) that cannot be determined

Definitions

Learning Objectives

Learning Objectives

Related questions

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amountA) less than face valueB) equal to the face valueC) greater than face valueD) that cannot be determined

Definitions

Learning Objectives

Learning Objectives

Related questions

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest semiannually would sell at an amount

A) less than face value
B) equal to the face value
C) greater than face value
D) that cannot be determined