Seaside issues a bond with a stated interest rate of 10%, face value of $50,000, and due in 5 years

Seaside 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 (rounded to nearest whole dollar)?

A) $83,920.

B) $46,320.

C) $54,055.

D) $50,000.

Answer: C

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.

Answer: A

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.

Answer: D

A bond issue with a face amount of $500,000 bears interest at the rate of 10%. The current market rate of interest is also 10%

A bond issue with a face amount of $500,000 bears interest at the rate of 10%. The current market rate of interest is also 10%. These bonds will sell at a price that is:

A) Equal to $500,000.

B) More than $500,000.

C) Less than $500,000.

D) The answer cannot be determined from the information provided.

Answer: A

Convertible bonds:

A) Provide potential benefits only to the issuer.

B) Provide potential benefits only to the investor.

C) Provide potential benefits to both the issuer and the investor.

D) Provide no potential benefits.

Answer: C

For a bond issue that sells for more than the bond face amount, the stated interest rate is:

A) The actual yield rates.

B) The prime rate.

C) More than the market rate.

D) Less than the market rate.

Answer: C