If bonds are issued with a stated interest rate higher than the market interest rate, the bonds will be issued at a discount.
The correct option is c.
A bond is merely a loan that a business has obtained. The firm receives the funding from investors who purchase its bonds rather than a bank. An interest coupon, or the yearly interest rate paid on a bond stated as a percentage of face value, is what the corporation gives in return for the capital.
When the market interest rate is higher than the bond's stated interest rate, the bond will issue at a discount. St. Clair Corporation sells $83,497 worth of 7%, 11-year bonds having a face value of $90,000.
Market interest rates and bond prices typically fluctuate in the opposite directions, which is a fundamental premise of bond investment. The cost of fixed-rate bonds decreases when market interest rates increase.
The complete question is :
If bonds are issued with a stated interest rate higher than the market interest rate, the bonds will be issued at.
a. A premium.
b. Face amount.
c. A discount.
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