Asked by Tanushri Sarkar on Jul 29, 2024
Verified
On January 1, 2010, Tiger Corporation sold $100, 000 of its 15%, five-year bonds dated January 1, 2010, for $102, 000 total cash.The bonds sold at
A) 98
B) 100
C) 102
D) a quoted price that cannot be determined from the information given
Quoted Price
The most current price at which an asset or service can be bought or sold in a marketplace.
Cash
Cash refers to money in physical form, such as banknotes and coins, that is available for immediate use.
- Absorb the principles of bond valuation in terms of face value and its impact on the effective rates of interest.
Verified Answer
ZK
Zybrea KnightAug 05, 2024
Final Answer :
C
Explanation :
The bonds were sold for $102,000 which is $2,000 more than their face value of $100,000. This means that the bonds were sold at a premium, which is common for bonds that have a higher interest rate than the current market rate. The premium represents the additional amount investors are willing to pay for a bond with a higher interest rate.
Learning Objectives
- Absorb the principles of bond valuation in terms of face value and its impact on the effective rates of interest.