The market interest rate related to a bond is also called the

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Jaelyn Lam

Business

20 March, 07:44

The market interest rate related to a bond is also called the

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Casey Wilson · Answer 1

effective interest rate

Explanation:

The effective interest rate is the rate that an investor actually earns from investing in a bond. The effective interest rate is usually different than the interest rate stated on a bond (e. g. coupon rate).

It is also called market interest rate because bonds are sold in secondary markets at a different price than face value (usually bonds are sold at a premium or at a discount). That price at which the bonds are sold determine if the effective interest rate will be higher or lower than the stated interest rate of the bond.