Question

If the market rate of interest is 7%, the price of 6% bonds paying interest semiannually with a face value of $500,000 will be Group of answer choices equal to $500,000 greater than $500,000 less than $500,000 greater than or less than $500,000, depending on the maturity date of the bonds

Answer 1

less than $500,000

Step-by-step explanation:

Based on the information given Bonds issued that has a CONTRACT RATE of 6% which is LESSER THAN the MARKET INTEREST RATE of 7% will lead to a DISCOUNT because the PRICE OF THE BONDS of 6% is LESSER THAN the FACE VALUE of the bonds which therefore means that the PRICE OF THE BONDS will be LESS THAN its face value of the amount of $500,000.