Question

The interest rate that determines the amount of cash paid to the bondholder is referred to as the:

a) the effective or market rate of interest
b) effective rate of interest
c) contract rate of interest
d) market rate of interest

Answer 1

The interest rate that determines the amount of cash paid to the bondholder is referred to as the market rate of interest. It is also sometimes called the effective or market rate of interest.

Step-by-step explanation:

The interest rate that determines the amount of cash paid to the bondholder is referred to as the market rate of interest. It is also sometimes called the effective or market rate of interest.

This rate is determined by the overall demand for investment opportunities and the riskiness of the borrower. It affects the value of bonds and determines the attractiveness of the bond to investors.