11.Donaldson Company issued $5,000 of 10-year bonds paying 10% annual interest. The current market rate of interest on comparable issues is 12%. What is the issue price of the bonds?
a.$4,435
b.$4,253
c.$5,615
d.$5,000
12.Upbeat Music Stores issued $500,000 face value of zero coupon bonds having a life of 10 years. (Zero coupon bonds pay zero percent interest.) If the market rate of interest is 8 percent, at what price did these bonds sell?
a.$135,761
b.$157,600
c.$158,610
d.$231,595
13.General Toys, Inc. sold five year bonds having a face value of $100,000 and a coupon rate of 7% when the market rate was 9%. The present value of $1 at 9% for five periods is $0.6499. The present value of a $1 annuity for 5 periods at 9% is $3.8897. At what price did these bonds sell?
a.$92,218
b.$93,690
c.$99,248
d.$100,000
14.Styles Ventures sold a $50,000 issue of bonds. The coupon rate was 10% and the market rate was 8%. The present value of a $1 annuity for ten periods at 8% is $6.7101. The present value of $1 for ten periods at 8% is $0.4632. The selling price of these bonds should be
a.$47,740
b.$50,000
c.$52,830
d.$56,710
15.A 10% bond is sold at a price that will result in a 9% effective yield. Therefore, we can conclude that the price at which the bond was sold was
a.greater than face value
b.less than face value
c.equal to face value
d.not determinable from above information
16.At the date of a bond issue, the effective rate of interest is significantly above the stated rate of interest. If the bond has a $1,000 face value, the proceeds from the issue would be
a.more than $1,000
b.less than $1,000
c.$1,000
d.$0
17.When the market rate for a bond is higher than the stated (or coupon) rate, the bond
a.will sell at a premium
b.will sell at par
c.will sell at a discount
d.cannot be sold until the market and stated rates are equal
18.If the market rate of the interest for bonds is less than the rate printed on the face of the bonds, then the bonds will be issued at
a.a discount
b.a premium
c.their face value
d.their face value less the interest rate printed on the face of the bonds
19.Javelin Sports sold $50,000 face value of ten-year, 8% bonds payable for $61,583 on January 1, 2007 when the market interest rate was 5%. What amount of interest expense will Javelin report for calendar year 2007?
a.$4,927
b.$4,000
c.$3,500
d.$3,079
20.On January 1, 2007, Beta Company issued 5-year bonds having a face value of $100,000. The bonds pay 7% interest annually and were sold for $94,706 to yield 8.34% interest. Beta’s 2007 income statement should report what amount for interest expense on these bonds?
a.$6,630
b.$7,000
c.$7,898
d.$8,340