What does it mean when a bond sells at a premium?
A premium bond is a bond trading above its face value or costs more than the face amount on the bond. A bond might trade at a premium because its interest rate is higher than the current market interest rates. The company's credit rating and the bond's credit rating can also push the bond's price higher.
When a bond sells at a premium the contract?
When bonds are issued at a discount, its coupon rate or contract rate is lower than the market rate. When bonds are issued at a premium, its coupon rate or contract rate is higher than the market rate.
When bonds are selling at premium the effective rate is higher than the stated rate?
When a bond is sold at a discount, the stated rate of interest is lower than the effective rate of interest on the bond. In contrast, when a bond is sold at a premium, the stated rate of interest is higher than the effective rate of interest. 12.
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.