Question

Investors willing to pay the full face amount for bonds that pay a lower contract rate of interest than the rate they could earn on similar bonds (market rate).

True / False.

Answer 1

The correct answer is False.

Step-by-step explanation:

The above statement is related to the bonds issued at a discount, where in the proposed scenario, the bonds will only be sold at a discount when the market interest rate is higher than that of the contract. When the opposite happens, the operation cannot be performed, since no benefits would be obtained.