Which Situation Exists When a Company Issues 10-Year,9%,$1,000,000 Bonds Paying

question 68

Multiple Choice

Which situation exists when a company issues 10-year,9%,$1,000,000 bonds paying interest on an annual basis,at a premium?

• A) The annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year.
• B) The annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.
• C) The issue price will be less than $1,000,000.
• D) The cash paid to bondholders will be based on the market rate of interest.

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