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Quiz 9
1. A bond issue with a face amount of $510,000 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:
Equal to $510,000.
More than $510,000.
Less than $510,000.
The answer cannot be determined from the information provided.
2. A bond issue with a face amount of $508,000 bears interest at the rate of 7%. The current market rate of interest is 8%. These bonds will sell at a price that is:
Less than $508,000.
Equal to $508,000.
The answer cannot be determined from the information provided.
More than $508,000.
3. A $506,000 bond issue sold for $487,000. Therefore, the bonds:
Sold at a discount because the market interest rate was higher than the stated rate.
Sold at a discount because the stated interest rate was higher than the market rate.
Sold for the $506,000 face amount less $19,000 of accrued interest.
Sold at a premium because the stated interest rate was higher than the market rate.
4. Given the information below, which bond(s) will be issued at a discount?
Bond 1.
Bond 3.
Bond 4.
Bonds 3 and 4.
5. Given the information below, which bond(s) will be issued at a premium?
Bond 1.
Bond 2.
Bond 3.
Bonds 1 and 4.
6. Discount-Mart issues $14 million in bonds on January 1, 2021. The bonds have a nine-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.) (Do not round your intermediate calculations.)
10%.
8%.
9%.
4%.
7. Discount-Mart issues $13 million in bonds on January 1, 2021. The bonds have a seven-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
What is the market annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six-month rate.) (Do not round your intermediate calculations.)
11%.
10%.
12%.
5%.
8. Discount-Mart issues $19 million in bonds on January 1, 2021. The bonds have a eight-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
What is the interest expense on the bonds in 2021?
$1,029,280.
$2,054,073.
$1,024,793.
$1,900,000.
9. Discount-Mart issues $15 million in bonds on January 1, 2021. The bonds have a eight-year term and pay interest semiannually on June 30 and December 31 each year. Below is a partial bond amortization schedule for the bonds:
What is the carrying value of the bonds as of December 31, 2022?
$13,502,153.
$13,415,532.
$13,592,239.
$14,492,239.
10 Tony Hawk’s Adventure (THA) issued callable bonds on January 1, 2021. THA’s accountant has projected the following amortization schedule from issuance until maturity:
THA issued the bonds for:
$390,000.
$370,205.
$483,600.
Cannot be determined from the given information.
Quiz 9 Answers
1. A bond issue with a face amount of $510,000 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:
Equal to $510,000.
More than $510,000.
Less than $510,000.
The answer cannot be determined from the information provided.
Answer: Equal to $510,000.