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if the market rate of interest is 6%, a $10,000, 10 year bond with a stated...

if the market rate of interest is 6%, a $10,000, 10 year bond with a stated annual interest rate of 8% would be issued at an amount of

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Answer #2

Solution: Greater than face value

Explanation: Face value refers to the par value is equal to the price of a bond when it is first issued, however thereafter the price of the bond fluctuates in the market as per the changes with interest rates while the face value remains constant. When a bond is issued at a premium the carrying value is greater than the face value as in this case because market rate of interest is 6% however stated annual interest rate of 8% is more than it.

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