Question
As we look at the annual interest payment of $100 in your example, we can see that the stated rate on the bond must be
As we look at the annual interest payment of $100 in your example, we can see that the stated rate on the bond must be 5% as follows:
100 / 2000 = 5% stated rate
So now let's ask, do the stated interest rate and the market interest rate NEED to be exactly the same? For example, let's assume we change the amount of the annual interest payment to $150 in your example. This would equate to a stated interest rate of 7.5% (150 / 2000 = 7.5%). Does this automatically mean that the market interest rate MUST also be 7.5%? Or can the stated rate be different from the market rate?
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