Determine whether a bond will sell at Face Value, Premium or Discount. Bond Contractual RateMarket Interest...
Determine whether a bond will sell at Face Value, Premium or Discount.
Bond Contractual RateMarket Interest RateBond Sells at:
a. 15%20%
b. 15%12%
c. 15%15%
Homework Answers
If the market rate on bond is greater than contract rate on bond then Bond is trading at Discount (Market rate >Contract rate)
If the market rate on bond is less than contract rate on bond then Bond is trading at premium (Market rate <Contract rate)
If the market rate on bond is Equals to contract rate on bond then Bond is trading at par (Market rate =Contract rate)
| Market rate | Contract rate | |||
| a | 20% | 15% | Market rate (20%)>Contract rate (15%) | Discount |
| b | 12% | 15% | Market rate <Contract rate | premium |
| c | 15% | 15% | Market rate =Contract rate | Par |
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Determine whether a bond will sell at Face Value, Premium or
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