[test25]

Assume a corporation issues 5-year bonds with a stated rate of 8%, when their market rate of interest is 9%. A year after the bonds are issued the company's market rate of interest falls to 6.5% and stays there for the next 4 years. If the company holds the bonds until maturity, what is the interest rate the company has paid over the life of the bonds?

[morgaine300]

That's an interesting little trick question. The market rate is what the bonds are worth out in the market, for a similar investment. But they aren't paying their worth. They're paying 8%. :-) (It doesn't mention rate yielded, or even interest expense recorded... it just says the rate paid.)