Given the Information Below, Which Bond(s) Will Be Issued at a Premium

question 58

Multiple Choice

Given the information below, which bond(s) will be issued at a premium? $$\begin{array} { | l | c | c | c | c | } \hline & \underline { \text { Bond 1 } } & \underline { \text { Bond 2 } } & \underline { \text { Bond 3 } } & \underline { \text { Bond 4 } } \\\hline \text { Stated Rate of Return } & 7 \% & 12 \% & 10 \% & 8 \% \\\hline \text { Market Rate of Return } & 8 \% & 10 \% & 10 \% & 9 \% \\\hline\end{array}$$

• A) Bond 1
• B) Bond 2
• C) Bond 3
• D) Bonds 2 and 4

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Definitions:

Machinery

Mechanical devices or equipment that perform various tasks in a production process or other applications.

Cash Flow

The complete sum of funds moving in and out of a company, significantly influencing its cash flow.

Stockholders

Persons or organizations that hold legal ownership of one or more shares in a corporation.

Net Working Capital

The gap between a firm's present assets and liabilities, reflecting its ability to meet short-term financial commitments.