For a corporation, a premium on bonds results when:

A) the contract rate is greater than the market rate.
B) the contract rate is less than the market rate.
C) the face value is greater than the effective rate.
D) the rate on the bond certificate is less than the market rate.

Premium

An amount paid regularly to insure something or to cover the cost of a policy, also used to describe the amount paid over the nominal value of something.

Bonds

Long-term debt securities issued by corporations and government entities that pay interest to the holder.

Contract Rate

A pre-agreed interest rate applied in the calculation of payments for a specific financial contract.