Question

3
when a bond sells at a premium:
multiple choice
the bond pays no interest.
it means that the bond is a zero - coupon bond.
the contract rate is equal to the market rate.
the contract rate is above the market rate.
the contract rate is below the market rate.

Explanation:

When a bond sells at a premium, it means the bond's contract rate (coupon rate) is higher than the market rate. Investors are willing to pay more (a premium) for the bond because it offers a higher interest payment compared to the current market rates. A bond that pays no interest or is a zero - coupon bond would not sell at a premium. When the contract rate is equal to the market rate, the bond sells at par. When the contract rate is below the market rate, the bond sells at a discount.

Answer:

The contract rate is above the market rate.