Kohl’s Corporation’s 7.25% bonds due in 2029 were reported as selling for 115.948

Kohl’s Corporation’s 7.25% bonds due in 2029 were reported as selling for 115.948. Were the bonds selling at a premium or at a discount? Why is Kohl’s able to sell its bonds at this price?


Answer:
The bonds were selling at a premium. This is indicated by the selling price of 115.948, which is stated as a percentage of the face amount and is more than par (100%). The market rate of interest for similar quality bonds was lower than 7.25%, and this is why the bonds were selling at a premium.