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Will the stated interest rate be higher than the market interest rate or will the market interest rate be higher than the stated interest rate when a bond is issued at face value?
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What occurs when a bond's stated interest rate is less than the market interest rate?
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
What occurs when a bonds stated interest rate is less than the market interest rate?
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
Is the price at which bonds sell determined by the interaction of stated rates of interest and market rates of interest?
Yes, the price at which bonds sell are determined by the interaction of stated rates of interest and market rates of interest.
How would you define the market rate for a bond?
The actual interest rate, however, determined at auction, is referred to as the market rate. The market rate may equal the stated rate, or it may be higher or lower.
What happens when issuing bonds payable when the market interest rate is less than the stated interest rate?
premium
What occurs when a bond's stated interest rate is greater than the market interest rate?
The bond's price will be in premium, meaning exceed 100
When a bonds stated interest rate is less than the market interest rate is the rate at a discount or premium?
When the coupon rate (the contractual periodical "interest" payments) are lower than the yield (the market required return) the bond will be in discount. This discount makes up for the low value of the coupons.
How is a money market savings account different than a regular savings account Can I make more money in it?
A simple savings account generally pays the owner a set amount of stated interest on his or her deposits based upon an particular annual rate. Money market savings accounts typically require higher balances and limit monthly transactions, but generally do pay a higher interest rate. Both kinds of accounts are guaranteed in the United States by the FDIC and NCUA.
What are Bond Premiums and Discounts?
Bond premiums refer to bonds that are issued at a price above its face value. for example, if the market rate for a bond is 8% and the stated rate on the bond is 9% then it would be a premium bond. Bond discounts refer to bonds that are issued at a price below its face value. For example, if the market rate for a bond is 9% and the stated rate on the bond is 10%, then it would be a discount bond.
What is the par value of an asset?
The par value of an asset is the price that was paid for it or the stated price, without consideration of markets pressures.For example, the par value of a US Treasury Bond set at $100,000 and paying 5% interest has a par value of $100,000. The market value may be higher or lower depending on financial market conditions.
What are the advantages and disadvantages of a money market account?
A money market account is like a savings account. The disadvantage is that there will not be much interest or return. The advantage is , subject to the restrictions stated when you open the account, you can quickly get all your money out.
Exactly what is a Stated Income mortgage loan and is it riskier than other types?
Stated income basically means that you are not providing proof of your income but you are stating it. The risk is that the borrower may not have stable income and the lender may charge higher interest rates.
