Question

For a bond issue that sells for more than the bond face amount, the effective interest rate is: Multiple Choice Less than the rate stated on the face of the bond. The rate printed on the face of the bond. More than the rate stated on the face of the bond. The Wall Street Journal prime rate.

Answer 1

Answer:

First answer

Explanation:

Bond interest rate is related to current interest rates and the perceived risk of the issuer. Therefore, if the bond sells at a price that is higher than its face value, it sells at the rate that is higher than effective interest rate. If the coupon rate is higher than market rate, bond prices tend to go higher. Coupon rate influence bond's price by influencing its competitiveness and value in the open market.