hich one of the following is the reason that bonds may sell at a discount o

Bonds are a common long-term debt instrument. They are interesting because they are issued with a stated interest rate. Unlike the market interest rates, a bond's stated interest rate will never change. The stated interest rate is what will be paid to the investor over the bond's life. This means that the only way to manipulate the total amount earned or paid from bonds is by adjusting the selling price: What does it mean when a bond is issued at a premium or a discount? How does the issuance cost affect the investor's earnings from the bond purchases? How is the company's recognized interest expense affected? Reminder: Use specific examples to support your analysis.

no Have All Questions been Answered? There are Three Parts to this problem (A, B, and C). Part A. From the following bond characteristics, list whether the bond was issued at a discount, premium, or par value. The market rate of interest is greater than the stated rate of interest Cash interest paid is less than the amount of interest expense The carrying value of the bond decreases over the life of the bond The amount of interest expense decreases over the life of the bond The present value of the bond cash flows equals the bond's face value The bond's carrying value is less than the bond's face value

1. Which of the following is true about bonds payable?A. Bonds payable is always reported as a non-current liability.B. Bonds are usually issued as a form of stock financing.C. Coupon interest payments on term bonds fluctuate depending on the market rate on the dateof interest payment.D. It is possible that the total proceeds from the bond issuance equal its maturity value.2. Which of the following is NOT TRUE about bond interest?A. These are usually paid at designated coupon interest payment dates.B. If a bond is issued at a discount, interest payment is lower than interest expense for the sameperiod.C. If a bond is issued at a discount, interest payment increases over the life of the bond since thecarrying value increases.D. A bond issued at more than face value is a bond issued at a premium.3. At the maturity date, bonds are redeemed at:A. Original issue priceB. Face valueC. Market value on redemption dateD. Market value on redemption date, less any related costs4. If the market…

Given two bonds identical but for time to maturity, the price of the longer-term bond will change more than that of the shorter-term bond, for a given change in market interest rates. A) True B) False

The market rate of interest for a bond issue that sells for more than its face value is      a. Equal to the rate stated on the bond.   b. Higher than the rate stated on the bond.   c. Not dependent on the rate of the bond.   d. Lower than the rate stated on the bond.

As the bond discount is amortized, the carrying value of the bonds will increase. True False As the bond premium is amortized, the carrying value of the bonds will decrease. True False When bonds that were initially issued at a discount are redeemed at maturity, the journal entry requires a ) debit to Bonds Payable, debit to Discount on Bonds Payable, and a credit to Cash ) debit to Bonds Payable, credit to Discount on Bonds Payable, and a credit to Cash O debit to Cash, credit to Bonds Payable and a credit to Discount on Bonds Payable ) debit to Bonds Payable and a credit to Cash When bonds that were initially issued at a premium are redeemed at maturity, the journal entry requires a ) debit to Bonds Payable and a credit to Cash O debit to Bonds Payable, credit to Premium on Bonds Payable, and a credit to Cash O debit to Bonds Payable, debit to Premium on Bonds Payable, and a credit to Cash O debit to Cash, credit to Bonds Payable and a credit to Premium on Bonds Payable When bonds…

explain how fluctuating market interest rates impact the price of a bond being sold on the secondary market. Why would a bond be selling at a premium or a discount?

Which of the following are generally true of all bonds? Group of answer choices a) Prices and returns for long-term bonds are more volatile than those for shorter-term bonds. b)Even though a bond has a substantial initial interest rate, its return can turn out to be negative if interest rates rise. c) The longer a bond's maturity, the lower is the rate of return that occurs as a result of the increase in the interest rate. d) All of the above are true. e) Only A and B of the above are true.

B. TRUE OR FALSE. Use the separate answer sheet. 1. If the effective (market) interest rate is less than the coupon (stated) interest rate on the date that bonds are sold, the bond price will be less than the face value of the bonds. 2. The effective interest rate method of amortizing bond discount or premium can only be used when it doesn't materially differ from the straight-line method, as the straight-line method is considered GAAP. 3. 4. 5. 6. 7. 678 8. 9. 10. A stock dividend converts earned capital into contributed capital, but total stockholder equity doesn't change. A bond's carrying value at maturity should equal its par or face value. Most corporations set a par value for their common shares at a fairly large number, such as $100 per share, in order to minimize legal liability on the part of shareholders. Treasury shares are considered to be issued and outstanding. Paid-in capital in excess of par value will be created when a 50% stock dividend is declared. All corporate…