If bonds are issued at a discount, it means that the

If bonds are issued at a discount, it means that the

financial strength of the issuer is suspect.
market interest rate is higher than the contractual interest rate.
market interest rate is lower than the contractual interest rate.
bondholder will receive effectively less interest than the contractual interest rate

Answer

Answer: 2. market interest rate is higher than the contractual interest rate.

The Price of a bond will be lower than the face value of the bond if, the market interest rate is more than the contractual rate. This is so because, to find out the price, the cash flows from the bond, consisting of the maturity value and the periodic $ interest paid at the contractual rate, would be discounted by the market rate which is higher than the contractual rate.

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Price lower than the face value would mean issuing at discount.