Asked by
Ramneet Singh
on Oct 15, 2024
Verified
When the contract rate on a bond issue is less than the market rate,the bonds sell at a discount.
Contract Rate
The agreed-upon interest rate specified in a contract, such as in loans, leases, or bonds.
Market Rate
The prevailing interest rate available in the marketplace for securities of similar risk and maturity to a bond.
Discount
A reduction from the usual cost of something, often provided as an incentive to encourage purchase.
- Comprehending the function and effect of the contract interest rate and market rate in determining bond prices.
Verified Answer
MG
Learning Objectives
- Comprehending the function and effect of the contract interest rate and market rate in determining bond prices.