Chapter 12, Problem 12.3SE

Determining bond prices

Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:

a. The market interest rate is 8%. Idaho issues bonds payable with a stated rate of 7.75%.

b. Austin issued 9% bonds payable when the market interest rate was 8.25%.

c. Cleveland's Cars issued 10% bonds when the marker interest rate was 10%.

d. Atlanta's Tourism issued bonds payable that pay the stated interest rate of 8.5%. At issuance, the market interest rate was 10.25%.