I am currently doing FRA reading 32 : non current liabilities . where it states about bonds . now from what kaplans videos and notes are saying i am confused . I always thought Bond issues at premium means the issue price of the bond if greater than the face value of the bond and discount means at a lesser price than the face value .
But in kaplan it states that the market rate > coupon rate for discount and coupon rate > market rate for prmium .
Can someone kindaly explain this ? i check it out in investopedia . they seem to support what i said , but i guess i am unable to make the relation with the market rate and coupon rate with the discount/premium issuance .
If the market rate (the rate of return that investors require to buy your bonds) is higher than the coupon rate on your bonds, then you will (have to) issue your bonds at a discount: the issue price will be less than the par (face) value.
Conversely, if the market rate is lower than the coupon rate on your bonds, then you will (get to) issue your bonds at a premium: the issue price will be greater than the par (face) value.