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Handout to review material covering Bonds (10 points)
1. Why would bonds ever sell at a premium? a. Stated Rate = Market Rate
b. Stated Rate > Market Rate
c. Stated Rate < Market Rate
2. Why would bonds ever sell at a discount? a. Stated Rate = Market Rate
b. Stated Rate > Market Rate
c. Stated Rate < Market Rate
3. At what amount do bonds sell for if the Stated Rate is equal to the Market Rate?
a. Bonds sell at a Discount
b. Bonds sell at Face Value
c. Bonds sell at a Premium
4. $500,000, 10%, 20 year bonds sell at 102.
These bonds are selling at a a. Discount b. Premium
Give the amount of cash received for these bonds when sold. ____________
5. On the day the bonds were dated, Willow Corp. issued 12% bonds having a face value of $100,000 for $95,233.
a. What entry is required to record the sale of the bonds?
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b. What amount of interest would be paid to bondholders annually? ____________
c. What amount of interest would be paid to bondholders semi-annually? ____________
