Asked by
Appoorva Bansal
on Nov 13, 2024
Verified
When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium.
Market Rate
The prevailing interest rate available in the open market, often influencing or benchmarking loan and savings rates.
Contract Rate
Contract rate refers to the agreed-upon price or interest rate specified within a contract, often related to loans or financial agreements.
Premium
The additional cost above the normal or nominal amount, usually associated with insurance premiums, bond market pricing, or superior products and services.
- Understand the connection between the rates of interest in the market and the value of bonds.
Verified Answer
JG
Learning Objectives
- Understand the connection between the rates of interest in the market and the value of bonds.