Ordinarily the proceeds from the sale of a bond issue will be equal to a the face
Ordinarily the proceeds from the sale of a bond issue will be equal to a the face
21. Ordinarily, the proceeds from the sale of a bond issue will be equal to:
A. The face amount of the bond.
B. The total of the face amount plus all interest payments.
C. The present value of the face amount plus the present value of the stream of interest payments.
D. The face amount of the bond plus the present value of the stream of interest payments.
22. Bonds usually sell at their:
A. Maturity value.
B. Present value.
C. Face value.
D. Call Price.
23. A $500,000 bond issue sold for $510,000. Therefore, the bonds:
A. Sold at a premium because the stated interest rate was higher than the market rate.
B. Sold for the $500,000 face amount plus $10,000 of accrued interest.
C. Sold at a discount because the stated interest rate was higher than the market rate.
D. Sold at a premium because the market interest rate was higher than the stated rate.
24. A $500,000 bond issue sold for $490,000. Therefore, the bonds:
A. Sold at a discount because the stated interest rate was higher than the market rate.
B. Sold for the $500,000 face amount less $10,000 of accrued interest.
C. Sold at a premium because the stated interest rate was higher than the market rate.
D. Sold at a discount because the market interest rate was higher than the stated rate.
25. For a bond issue that sells for more than the bond face amount, the stated interest rate is:
A. The actual yield rate.
B. The prime rate.
C. More than the market rate.
D. Less than the market rate.
26. For a bond issue that sells for less than the bond face amount, the stated interest rate is:
A. The actual yield rate.
B. The prime rate.
C. More than the market rate.
D. Less than the market rate.
27. Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 7% interest. The current market rate of interest is 7%. Which of the following is correct?
A. Both bonds will sell for the same amount.
B. Bond X will sell for more than Bond Y.
C. Bond Y will sell for more than Bond X.
D. Both bonds will sell at a premium.
28. Bond X and Bond Y are both issued by the same company. Each of the bonds has a face value of $100,000 and each matures in 10 years. Bond X pays 8% interest while Bond Y pays 9% interest. The current market rate of interest is 8%. Which of the following is correct?
A. Both bonds will sell for the same amount.
B. Bond X will sell for more than Bond Y.
C. Bond Y will sell for more than Bond X.
D. Both bonds will sell at a discount.
29. Raiders Company issues a bond with a stated interest rate of 10%, face value of $50,000, and due in 5 years. Interest payments are made semi-annually. The market rate for this type of bond is 12%. What is the issue price of the bond?
A. $83,920
B. $46,320
C. $53,605
D. $50,000
30. Raiders Company issues a bond with a stated interest rate of 10%, face value of $50,000, and due in 5 years. Interest payments are made semi-annually. The market rate for this type of bond is 8%. What is the issue price of the bond?
A. $83,920
B. $46,320
C. $54,055
D. $50,000
