Answer: When the market rate of interest is greater than the contractual rate of interest bonds will be issued at a discount.
Explanation: The market rate is the rate that is usually charged for an item in a free market. If demand goes up, some may increase the price of the item to set a higher market rate. Contractual interest rate is the rate that is included in the terms of a note payable or bond payable. This rate is the interest that is deemed to be paid. If the market rate is higher than the contractual rate, the bond will be sold at a cheaper value.
