Problem: If the market interest rate is 5% when Mackerel Corp. issues its bonds, will the bonds be prices at par, at premium, or at a discount?
The 6% bonds issued when the market interest rate is 5% will be priced at {a discount, a premium, par (maturity) value}. They are {attractive, unattractive} in this market, so investors will pay {less than maturity value, maturity value, more than maturity value} to acquire them.
If the market interest rate is 7% Mackerel Corp. issues its bonds, will the bonds be prices at par, at premium, or at a discount?
The 6% bonds issued when the market interest rate is 7% will be priced at {a discount, a premium, par (maturity) value}. They are {attractive, unattractive} in this market, so investors will pay {less than maturity value, maturity value, more than maturity value} to acquire them.