Abond issue with a face amount of $400,000 bears interest at the rate of 7%. the current market rate of interest is 9%. these bonds will sell at a price that is:
a) more than $400,000.
b) equal to $400,000.
c) less than $400,000.
d) the answer cannot be determined from the information provided.

C) Less than $400,000

Explanation:

The bond will sell at a discount.

When the market interest rate is higher than a bond's stated interest rate, the bond will be sold at a price lower than face value, or it will sell at a discount.

Inversely, if the bond's interest rate is higher than the market interest rate, the bond will sell at a higher price than face value, or at a premium.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

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