When the market rate of interest is equal to the states rate of interest on the bond, what will the bond require.

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When the market rate of interest is equal to the state’s rate of interest on the bond, the bond will require a coupon payment equal to the state’s rate. This is because bonds are priced inversely based on their interest rates; when a bond’s interest rate matches that of the marketplace, it is said to be at par value. As such, investors will expect a return equal to what they could get by investing in other securities with similar risk profiles. In this case, that would be a coupon rate equal to the prevailing market rate for bonds with similar risk profiles.