Answer Question: 27If bonds are issued at a discount, it means that thea. market interest rate is higher than the contractual interest rate.b. bondholder will receive effectively less interest than thecontractual interest rate.c. financial strength of the issuer is suspect.d. market interest rate is lower than the contractual interest rate.ANSWER: A

When bonds are issued at a discount, it means they are sold for less than their face value. This…

Answered: Question: 27 If bonds are issued at a…

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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Financial Accounting
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Financial Accounting Question: 27
If bonds are issued at a discount, it means that the a. bondholder will receive effectively less interest than the contractual rate of interest b. market interest rate is lower than the contractual interest rate c. financial strength of the issuer is suspect d. market interest rate is higher than the contractual interest rate
QUESTION 19 Which of the following is not a correct statement about the bond? Bond can be either non-interest-bearing or interest-bearing. Non-interest-bearing bonds sell at discount upon issuance. Price of a discount bond will go up as it approaches maturity. There is an inverse relation between the bond price and interest rate. Baseline interest rate for the bond market is LIBOR rate.
Answer these two fast
Exercise 2.4 Compared to bonds with longer maturity, bonds with shorter maturity respond. dramatically to changes in interest rates.
If the market rate of interest is greater than the contractual rate of interest, bonds will sell a. at a discount b. only after the stated rate of interest is increased c. at a premium d. at face value
4. When the market rate of interest is greater than the contract rate ofinterest, the bonds should sell at a. a premium b. par value c. a discount d. par value
Question 2 A lower bond rating directly translates into a higher, higher interest b. lower, higher interest Oc. higher; higher default d. lower, lower interest O e. higher; lower interest prices and PERS rates on the firm's bonds.
Multiple ChoiceIdentify the choice that best completes the statement or answers the question. 9. For a liability to exist, a. a past transaction or event must have occurred. b. the exact amount must be known. c. the identity of the party owed must be known. d. an obligation to pay cash in the future must exist. 10. The effective interest rate on bonds is higher than the stated rate when bonds sell a. at face value. b. above face value. c. below face value. d. at maturity value. 11. The effective interest rate on bonds is lower than the stated rate when bonds sell a. at maturity value. b. above face value. c. below face value. d. at face value. 12. When interest expense is calculated using the effective-interest amortization method, interest expense (assuming that interest is paid annually) always equals the a. actual amount of interest paid. b. book value of the…

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