**Question:**A $10,000 bond issue with a stated rate of interest of 10%, when the market rate of interest is 12%, means that the bond will be sold for:**Options:**- A. $10,000- B. more than $10,000- C. less than $10,000- D. the maturity value**Explanation:**When the market rate of interest (12%) is higher than the bond's stated rate of interest (10%), the bond will typically sell for less than its face value or maturity value ($10,000). This is because investors can earn a higher return in the market, so the bond must be discounted to offer a competitive yield.**Correct Answer:**C. less than $10,000

Issue price of the bonds = Present value of principal + Present value of interest payments where,…

Answered: AS10,000 bond issue with a stated rate…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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AS10,000 bond issue with a stated rate of interest of 10%, when the market rate of interest is 12%, means that the bond will be sold for. O A. $10,000 OB. more than $10,000. OC. less than $10,000. O D. the maturity value.