Question

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

Explanation:

When a bond sells at a premium, it means the bond's contract rate (coupon rate) is higher than the market interest rate. Investors are willing to pay more (a premium) for the bond because it offers a higher return compared to the current market rates. If the contract rate were equal to the market rate, the bond would sell at par. If the contract rate were below the market rate, the bond would sell at a discount. A zero - coupon bond does not pay periodic interest (but this is not related to selling at a premium). And a bond that pays no interest is a different concept (like a zero - coupon bond) and not the reason for selling at a premium.

Answer:

The contract rate is above the market rate.