Move the market rate above and below the 8% contract rate and watch the issue price cross par.
$4,000
par × 4% — fixed by contract
$100,000
$0
| Period | Straight-line | Effective interest |
|---|---|---|
| Issue | $100,000 | $100,000 |
| 1 | $100,000 | $100,000 |
| 2 | $100,000 | $100,000 |
| 3 | $100,000 | $100,000 |
| 4 | $100,000 | $100,000 |
| 5 | $100,000 | $100,000 |
| 6 | $100,000 | $100,000 |
| 7 | $100,000 | $100,000 |
| 8 | $100,000 | $100,000 |
Market 10% → price $93,537 · discount $6,463 · carrying value reaches $100,000 at period 8
Touch the instrument to see what to notice.