Final answer:
If a bond is sold at 97, it means it is selling for less than its face value, which indicates that the market interest rate was greater than the bond's coupon or stated rate, hence, the market rate was greater than the stated rate.
Step-by-step explanation:
If a bond sold at 97, that is, at 97% of its face value, it indicates that the bond is selling for less than what it was originally worth. In financial markets, the price at which a bond sells is affected by the interest rates in the market relative to the bond's coupon rate, which is the interest rate that the bond will pay. According to Financial Markets theory, if the market interest rate is greater than the bond's coupon rate, the bond will sell for less than its face value as investors will demand a higher return for the same amount of money.
Therefore, the correct answer is that the market rate was C. greater than the stated rate. This disparity between the bond's coupon rate and the market interest rate leads to the bond's price decrease so that it can yield a market-competitive return.