Question

A bond is issued at a discount when a​ bond's stated interest rate is​ ________. A. more than the effective interest rate B. equal to the market interest rate C. less than the market interest rate D. more than the market interest rate

Answer 1

Answer: C. Less than Market Interest rate

Explanation: When the interest rate on a bonds issued by an organization is lesser than the prevailing interest rate being offered in the market at a certain time on Bank deposits, loans or other interest bearing funds, organization tends to issue discounts on bonds in scenarios like this and as such bonds are being issued or traded at prices lower or below it's face value in other to encourage investors and bridge the interest gap between the bond rate and the market rate.