Asked by abdullah Mohammed on Apr 28, 2024
Verified
When the contract rate of a bond is greater than the market rate on the date of issuance,the bond sells at a discount.
Contract Rate
The interest rate specified in a contract, such as a loan agreement or bond indenture.
Market Rate
The prevailing price or rate at which goods, services, or securities are traded in an open market.
Discount
A reduction from the usual cost of something, often applied to prompt payments or for certain groups of people like students or seniors.
- Absorb the theories and monetary impacts related to issuing bonds with a premium or at a discount.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
False
Explanation :
When the contract rate of a bond is greater than the market rate on the date of issuance, the bond sells at a premium (not a discount as stated in the question). When the market rate is greater than the contract rate, the bond sells at a discount.
Learning Objectives
- Absorb the theories and monetary impacts related to issuing bonds with a premium or at a discount.
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