A Bond Has a $1,000 Par Value, Makes Annual Interest

question 49

True/False

A bond has a $1,000 par value, makes annual interest payments of $100, has 5 years to maturity, cannot be called, and is not expected to default.The bond should sell at a premium if interest rates are below 10% and at a discount if interest rates are greater than 10%.

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Definitions:

Control Account

An account in the general ledger used to summarize and consolidate transactions from multiple subsidiary accounts.

Accounts Payable Subsidiary Ledger

A book or file that contains, in alphabetical order, the name of the creditor and amount owed from purchases on account.

F.O.B. Destination

A shipping term indicating that the seller pays for transportation and is responsible for the goods until they are delivered to the buyer's location.

Merchandise Account

An account used to track the buying and selling of goods for resale in the normal course of business.