Answer: Less than $496000.
Explanation:
This is the case where market rate of interest is greater than the coupon rate.
current market rate of interest = 11%
face amount = $496000
bears interest at the rate of 10%
In this case, buyer will purchase these bond below the face value and hence bonds are issued at a discount. So, the price of these bonds are less than the face value.
This is due to the higher market interest rate because if a buyer can get higher return from market, so why would he buy these bonds.
∴ These bonds will sell at a price that is less than $496000.
