A Corporation Issued 8% Bonds with a Par Value of $1,000,000

question 71

Multiple Choice

A corporation issued 8% bonds with a par value of $1,000,000, receiving a $20,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is:

• A) $0.
• B) $10,000 gain.
• C) $10,000 loss.
• D) $22,000 gain.
• E) $22,000 loss.

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Definitions:

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of the numbers in the set.

Unimodal

Describing a distribution with a single prominent peak or mode, indicating the most commonly occurring value.

Median

The middle value in a sorted list of numbers, which separates the higher half from the lower half of the dataset.

Mean

A statistic that represents the average value in a set of numbers, calculated by adding all values and dividing by the number of values.