A Company Issued 10-Year,8% Bonds with a Face Value of $200,000.Interest

question 54

Multiple Choice

A company issued 10-year,8% bonds with a face value of $200,000.Interest is paid annually.The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds.Which of the following statements is correct?

• A)The company must pay $184,000 at maturity plus $16,000 in interest each year for 10 years.
• B)The company must pay $206,948 at maturity plus $15,000 in interest each year for 10 years.
• C)The company must pay $200,000 at maturity plus $16,000 in interest each year for 10 years.
• D)The company must pay $200,000 at maturity plus $15,000 in interest each year for 10 years.

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Definitions:

Saving Rate

The portion of income that is not spent on consumption but is saved or invested for future use.

Gold Standard

A monetary system where a country's currency or paper money has a value directly linked to gold; countries agree to convert currency into a fixed amount of gold.

Fixed Exchange-Rate

A regime under which the government or central bank ties the official exchange rate to another country's currency or the price of gold.

Capital Account

A national account that shows the net change in asset ownership for a country. It includes foreign investments and loans.