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If the market interest rate is greater than the stated interest rate bonds will sell?
If the market interest rate is greater than the stated interest rate on bonds, the bonds will sell at a discount. Investors will demand a lower price for these bonds to yield a competitive return that matches the higher prevailing market rates. Consequently, the bond's price must decrease to attract buyers, as they seek better returns elsewhere. This relationship illustrates the inverse connection between interest rates and bond prices.
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True or false A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate?
True
When a bonds stated interest rate is less than the market interest rate is it at a discount or premium?
When a bond's stated interest rate is less than the market interest rate, it is sold at a discount. This is because investors are less willing to pay the full face value for a bond that offers lower returns compared to prevailing rates. As a result, the bond's price falls below its par value to make it more attractive to potential buyers.
Who determines the rate of interest paid on a bond?
Bonds have a predetermined rate of interest called the stated or contract rate, which is established by the board of directors.
A firm has an issue of 1000 par value bonds with a 12 percent stated interest rate outstanding The issue pays interest annually and has 10 years remaining to its maturity date If bonds of similar r?
1268.20
Bonds usually sell at a premium when?
when interest rates in the general market fall. This makes the interest rate on the bond relatively more attractive.
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.
What happens when issuing bonds payable when the market interest rate is less than the stated interest rate?
premium
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.
True or false A corporation that issues bonds at a discount will recognize interest expense at a rate which is greater than the market interest rate?
True
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.
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.
When a bonds stated interest rate is less than the market interest rate is it at a discount or premium?
When a bond's stated interest rate is less than the market interest rate, it is sold at a discount. This is because investors are less willing to pay the full face value for a bond that offers lower returns compared to prevailing rates. As a result, the bond's price falls below its par value to make it more attractive to potential buyers.
Why are long term bonds sensitive interest rate changes?
Long-term bonds are sensitive to interest rate changes because their fixed interest payments are locked in for an extended period. When interest rates rise, new bonds are issued with higher yields, making existing bonds with lower yields less attractive. This leads to a decrease in the market price of long-term bonds, as investors demand a higher return to compensate for the opportunity cost of holding them. Consequently, the longer the duration of the bond, the greater the price volatility in response to interest rate fluctuations.
Who determines the rate of interest paid on a bond?
Bonds have a predetermined rate of interest called the stated or contract rate, which is established by the board of directors.
How does the federal reserve raise an interest rate?
Through open market sales or bonds.
What is the interest rate on a corporate bond?
The prices of corporate bonds fluctuate as they are traded on the bond market. Like government bonds, a corporate bond pays a fixed amount of interest each .
A firm has an issue of 1000 par value bonds with a 12 percent stated interest rate outstanding The issue pays interest annually and has 10 years remaining to its maturity date If bonds of similar r?
1268.20
