When the contract rate is less than the market rate a bond sells at a premium quizlet?
If the contract rate is less than the market rate, the bond sells at a discount. If the contract rate is equal to the market rate, the bond sells at par. On December 31, 2019, Spearmint, Inc., issued $450,000 of 9 percent, 3-year bonds for cash of $461,795.
When the market rate of interest is less than the contract rate for a bond the bond will sell for a premium True False?
A bond is usually divided into a number of individual bonds of $500 each. When the market rate of interest is less than the contract rate for a bond, the bond will sell for a premium. If the market rate of interest is 8% and a corporation's bonds bear interest at 7%, the bonds will sell at a premium.
When a bond sells at a premium?
A bond will trade at a premium when it offers a coupon (interest) rate that is higher than the current prevailing interest rates being offered for new bonds. This is because investors are willing to pay more for the bond's higher yield.
When the market rate is less than the coupon rate the bond is selling at?
Then return as per market is 4.76% and if the market value of the bond is $950, then the return is 5.26%. Hence, when the market yield is more than the coupon rate, the bond sells at a discount and if the market rate is less than the coupon rate, the bond sells at a premium.