A Firm Has an Issue of $1000 Par Value Bonds

question 205

Multiple Choice

A firm has an issue of $1000 par value bonds with a 12 percent stated interest rate outstanding. The issue pays interest annually and has 10 years remaining to its maturity date. If bonds of similar risk are currently earning 8 percent, the firm's bond will sell for_________ today.

• A) $805
• B) $1,268
• C) $1,000
• D) $851

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Definitions:

Rental Payments

Regular payments made by a tenant to an owner for the use of the owner's property or land.

Accounting Profit

The total revenue of a firm less its explicit costs; the profit (or net income) that appears on accounting statements and that is reported to the government for tax purposes.

Entrepreneur's Talent

Entrepreneur's talent refers to the unique skills, insights, and abilities that an entrepreneur applies to develop innovative ideas, overcome obstacles, and drive business success.

Annual Revenue

The total amount of money generated by a company from its activities, such as sales or services, before any expenses are subtracted, in one fiscal year.