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Do all bonds offer interest income? O Yes, but only during a bull market O No, except for during a bear market O No O Yes
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- The contract interest rate for bonds:A. must equal the effective interest rate.B. is greater than the effective interest rate when bonds are issued at a discount.C. has no relation to the cash flow associated with a particular bond.D. will fluctuate over the life of a bond.E. None of these.Moving to another question will save this response. Quèstion 6 In bond financing, if the interest on bonds (contract rate) higher than the market interest rate; the bonds will be issued with: O A. par value. O B. premium on bonds payable. OCa specific maturity date. O D. discount on bonds payable.When bonds are retired at maturity, ________. A. the carrying value always equals the face value B. the carrying value equals the face value plus the unamortized premium or less the unamortized discount C. the bondholders are paid the face value plus the unamortized premium or less the unamortized discount D. the entry to retire the bonds may include a gain or loss on retirement of bonds
- When bonds are issued at a discount, what happens to the carrying value and interest expense over the life of the bonds? O Carrying value and interest expense decrease. Carrying value decreases and interest expense increases. O Carrying value and interest expense increase. Carrying value increases and interest expense decreases. None of the above.If bonds issue at a discount, is the stated interest rate less than, equal to, or more than the market interest rate? Explain.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
- Which of the following is not an effect of a call provision? A. Issuer can refund the bond issue if rates decline. B. Requires the issuer to pay off the loan over its life rather than all at maturity. C. Bond investors require higher yields on callable bonds D. Upon calling bonds the issuer must pay call premium to bond holder E. All of the above are effects of a call provisionA debenture is ________.A. the interest paid on a bondB. a type of bond that can be sold back to the issuing company whenever the bondholder wishesC. a bond with only the company’s word that they will pay it backD. a bond with assets such as land to back their word that they will pay it backWhich of the following statements relating to bonds is incorrect? A. A bond’s face value is the amount the issuer must pay to the bondholder at maturity. B. The owner of a registered bond is the person to whom interest payments are mailed. C. A bond will typically sell at a discount when its nominal rate is less than the current market rate of interest. D. A bond is a debt instrument giving the issuer flexibility as to maturity date.
- From page 9-4 of the VLN, what causes the bond liability for a bond issued at a premium to decrease each interest payment period? Group of answer choices A. Paying the interest. B. The amortization of the premium. C. Paying the principal. D. The bond liability does not decrease when a bond is issued at a premium.________ bonds are characterized by interest payments that are required only when earnings are available from which to make such payment Floating rate Revenue Junk MortgageWhich of the following would describe a callable bond? Oa. Borrower has the right to issue more bonds prior to due date of existing bonds. Ob. Borrower has the right to call off the interest payments on the bonds. Oc. Investor has the right to call off the interest payments on the bonds. C. d. Borrower has the right to pay off the bonds prior to due date.