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3. A company is planning to borrow funds by selling (issuing) bonds. The coupon rate on the bonds is 3%. The current market r
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The company is planning to borrow funds by issuing bonds @ 3% rate of interest i.e. the company is paying 3% rate of interest on bonds. The current market rate for similar bonds is 5%.
When the market interest rate is higher than a bond's coupon rate then difference is called bond discount. OR

A bond is traded at discount when its coupon rate is lower than current market rate therefore in this case the bond sells at discount.

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