In Theory (Disregarding Any Other Marketplace Variables)the Proceeds from the Sale

question 12

Multiple Choice

In theory (disregarding any other marketplace variables) the proceeds from the sale of a bond will be equal to:

• A)The face amount of the bond plus the present value of the interest payments made during the life of the bond discounted at the prevailing market rate of interest.
• B)The present value of the principal amount due at the end of the life of the bond plus the present value of the interest payments made during the life of the bond, each discounted at the prevailing market rate of interest.
• C)The present value of the principal amount due at the end of the life of the bond plus the present value of the interest payments made during the life of the bond, each discounted at the stated rate of interest.
• D)The sum of the face amount of the bond and the periodic interest payments.

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Definitions:

Average Variable Cost

The sum of all variable expenses divided by the total output, indicating the cost of variable elements for each unit produced.

Accounting Profit

The net income for a company calculated by subtracting total expenses from total revenues.

Interest Rate

The amount charged, expressed as a percentage, by a lender to a borrower for the use of assets.

Sunk Costs

Expenses that have already been incurred and cannot be recovered.