Asked by Chetan Aggarwal on Apr 28, 2024
Verified
The contractual interest rate is always equal to the market interest rate on the date that bonds are issued.
Contractual Interest Rate
Rate used to determine the amount of cash interest the borrower pays and the investor receives.
Market Interest Rate
The rate investors demand for loaning funds to the corporation.
- Understand the concept of bonds and their characteristics including the differences between contractual and market interest rates.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
False
Explanation :
The contractual interest rate may be higher or lower than the market interest rate at the time of issuance, depending on factors such as creditworthiness, term to maturity, and prevailing economic conditions.
Learning Objectives
- Understand the concept of bonds and their characteristics including the differences between contractual and market interest rates.