Select the appropriate bond selling price based on the following scenario: the contract interest rate on a

Question:

Select the appropriate bond selling price based on the following scenario: the contract interest rate on a Hydro Electric Municipal $1,000 bond is 4% and the market interest rate is 7%.

a. The bond will sell at par value or $1,000

b. The bond will sell at a premium—more than $1,000

c. The bond will sell at a discount—less than $1,000

d. There is insufficient information to form a conclusion on the selling price of a bond.

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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