Will the bond sell at par and a premium or a discount

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Point 1: A bank may consider lending $100,000,000 to a company too risky, so companies can issue bonds in roughly $1,000 increments which spreads the risk around to thousands of people and organizations that purchase bonds. Bonds are quoted as a % of face value, not like stocks. If a bond is selling at 98, it is selling at $980 which is a discount. If a bond is selling at 102 it is selling at $1,020. Study illustration 8-3 for a few minutes and answer the following:

Question 1. If the bond contractual interest is 12% and the market interest rate is 10% will the bond sell at par, a premium or a discount?

Question 2. If the bond contractual interest rate 4% and the market interest rate is 6%, will the bond sell at par, a premium or discount

Reference no: EM132488419

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