In the transaction of issuing bonds, which condition leads to a bond being sold at a discount?

A bond is sold at a discount when the market rate exceeds the stated rate. This occurs because investors are seeking higher returns than what the bond offers. The stated rate (or coupon rate) is the interest rate that the bond issuer agrees to pay the bondholder; however, if the prevailing market conditions dictate that interest rates are higher, investors will demand a higher yield to make their investments competitive.

To attract buyers under these conditions, the bond will be sold for less than its face value. This discount compensates investors for receiving a lower interest payment compared to what is available in the market. As a result, the effective yield on the bond, which includes both the interest payments and the capital gain from purchasing the bond at a discount, becomes more attractive, bringing it in line with the higher market rate.

In summary, when the market rate is higher than the stated rate, the bond’s price decreases, leading to it being sold at a discount to remain appealing to investors.