A bond is issued with a face amount of 500000 and a stated i

A bond is issued with a face amount of $500,000 and a stated interest rate of 10%. The current market rate of interest is 8%. These bonds will sell at a price that is Multiple Choice Equal to $500,000. OMore than $500,000 Less than $500,000. The answer cannot be determined from the information provided.

Solution

Dear student...Thank you for using chegg...correct answer is more than $500,000

When the market rate of interest is higher than the bonds\' stated rate, the bonds will sell at a discount

When the market rate of interest is Lower than the bonds\' stated rate, the bonds will sell at a premium

In Above case market interest rate is 8% and bond stated rate is 10% which is more than market rate...Thus will sell at premium i.e. more than 500,000