IBM Is Planning to Issue $1,000 Bonds with a Stated

question 66

Multiple Choice

IBM is planning to issue $1,000 bonds with a stated interest rate of 7% and a maturity date of July 15,2019.Interest rates rise in the economy so that similar financial investments pay 9%.IBM will:

• A)not be able to issue the bonds because no one will buy them.
• B)receive a higher issue price to compensate buyers for the lower stated interest rate.
• C)have to accept a lower issue price to attract buyers.
• D)have to reprint the bond certificates to change the stated interest rate to 9%.

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Definitions:

Fully Funded Pension Rights

A pension plan that has enough assets to meet all its obligations to retirees and current employees.

Pension Expense

The cost recognized by an employer for contributions to pension plans on behalf of its employees for the current period.

Salaries Expense

An account that represents the total amount paid to employees for services rendered during a specific period, usually before any deductions.

Quick Ratio

A measure of a company's ability to meet its short-term obligations with its most liquid assets, excluding inventories.