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    Discussing issue price of bond

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    Stone, Inc. issued bonds with a maturity amount of $200,000 and a maturity ten years from date of issue. If the bonds were issued at a premium, this indicates that

    a. the effective yield or market rate of interest exceeded the stated (nominal) rate.
    b. the nominal rate of interest exceeded the market rate.
    c. the market and nominal rates coincided.
    d. no necessary relationship exists between the two rates.

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    Price of bond is equal to the sum of PV's of all future cash flows at ...

    Solution Summary

    Solution discusses the reasons for issuing the bonds at a premium.