KR issued bonds payable with a face amount of $200,000 and a maturity date ten years from date of issuance.If the bonds were issued at a premium, this indicated that:
A)The effective and stated rates of interest were the same.
B)The stated rate of interest exceeded the effective rate of interest.
C)The effective rate of interest exceeded the stated interest rate.
D)No necessary relationship exists between the two rates.
E)The stated interest rate and the market interest rate were the same.

Question

Quizplus · Accepted Answer

When bonds are issued at a premium, it means that the interest rate stated on the bond (stated rate) is higher than the prevailing market interest rate (effective rate) at the time of issuance. This makes the bonds more attractive to investors, who are willing to pay more than the face value to receive the higher interest payments.

KR Issued Bonds Payable with a Face Amount of $200,000