if the market rate of interest is $8\\%$ and a corporations bonds bear interest at $7\\%$, the bonds will…

if the market rate of interest is $8\\%$ and a corporations bonds bear interest at $7\\%$, the bonds will sell at a premium.\n\ntrue\n\nfalse

if the market rate of interest is $8\\%$ and a corporations bonds bear interest at $7\\%$, the bonds will sell at a premium.\n\ntrue\n\nfalse

Answer

Explanation:

Step1: Identify the bond's coupon rate and market rate

The corporation's bond interest rate (coupon rate) is $7%$, and the market rate of interest is $8%$.

Step2: Compare the rates to determine pricing

When the coupon rate is lower than the market rate, the bond is less attractive to investors. To compensate for the lower yield, the bond must sell for less than its face value.

Step3: Determine the specific pricing term

A bond selling for less than face value is sold at a discount. A bond sells at a premium only when the coupon rate is higher than the market rate.

Answer:

False