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- When a bond sells at a discount, the carrying value ________ after each amortization entry. A. increases B. decreases C. stays the same D. cannot be determinedA premium occurs when the issue price of a bond is above its face amount. True or False True FalseFor a bond issue that sells for less than its face value, the market rate of interest is a. Higher than the rate stated on the bond. b. Dependent on the rate stated on the bond. c. Equal to the rate stated on the bond. d. Less than the rate stated on the bond.
- What happens when a bond's market rate is less than the stated rate?The price of a bond is the present value of promised future payments to the bondholder. A) True B) FalseThe market rate of interest for a bond issue that sells for more than its face value is a. Equal to the rate stated on the bond. b. Higher than the rate stated on the bond. c. Not dependent on the rate of the bond. d. Lower than the rate stated on the bond.
- Under what conditions will a discount bond have anegative nominal interest rate? Is it possible for a coupon bond or a perpetuity to have a negative nominalinterest rate?A bond will sell at a premium when its coupon interest rate: is lower than the market interest rate on similar bonds. O exceeds the market interest rate on similar bonds. O varies more than the market interest rate on similar bonds. O equals the market interest rate on similar bonds.If I have a bond that is currently selling at a premium, should I sell it and purchase a bond selling at par instead? Why or why not?
