[The Following Information Applies to the Questions Displayed Below

question 43

Multiple Choice

[The following information applies to the questions displayed below.]

On January 1, Year 1, Wayne Company issued bonds with a face value of $600,000, a 6% stated rate of interest, and a 10-year term. Interest is payable in cash on December 31 of each year. Wayne uses the straight-line method to amortize bond discounts and premiums.


-Which of the following statements is true if Wayne issued the bonds for 96?

• A)The market rate of interest was equal to the stated rate of interest.
• B)The market rate of interest was lower than the stated rate of interest.
• C)The market rate of interest was higher than the stated interest rate.
• D)The bonds carried a variable or floating rate that changed in response to market conditions.

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Definitions:

Differentiated Products

Goods or services that are distinguished from each other based on quality, features, or branding, making them non-identical from a consumer's perspective.

Elastic Demand

A situation where the demand for a product is sensitive to price changes, meaning small price changes lead to large changes in quantity demanded.

Barriers To Entry

Factors that prevent or hinder new competitors from easily entering an industry or area of business, often maintaining high levels of profit for those already established.

Product Differentiation

The process of distinguishing a product or service from others in the market to make it more attractive to a particular target market.