Question

Eketorp Incorp. issued $30 million of 10-year, 4% bonds yielding (that is, having an effective yield...

Eketorp Incorp. issued $30 million of 10-year, 4% bonds yielding (that is, having an effective yield of) 3%. Will these bonds sell for $30 million, less than $30 million, or more than $30 million? Why? If the bonds sell at that price, are they selling at par, a discount, or a premium?

If Eketorp's bonds pay interest annually, calculate their selling price (show your calculation).

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