When the contract rate of a corporate bond is lower than the market rate, what happens to the face value of the bond? The contract rate is subtracted from the market rate and the difference is rebated to investors. The difference of interest rates does not affect the face value of the bond. The bond is sold at a discount below face value. The bond is sold at a premium above face value.

When the contract rate of a corporate bond is lower than the market rate, what happens to the face value of the bond? The contract rate is subtracted from the market rate and the difference is rebated to investors. The difference of interest rates does not affect the face value of the bond. The bond is sold at a discount below face value. The bond is sold at a premium above face value.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter22: Corporations: Bonds

Section: Chapter Questions

Problem 10RQ: When bonds are redeemed before maturity, how is the gain or loss on redemption determined? Why does...

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If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. financial strength of the issuer is suspect d. market interest rate is higher than the contractual interest rate
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explain how fluctuating market interest rates impact the price of a bond being sold on the secondary market. Why would a bond be selling at a premium or a discount?
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if the market rate of interest is lower than the stated rate, bonds will sell at an amount ?
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