Bonds with a face value of $200,000 were sold at an effective interest rate of 8% to yield cash proceeds in excess of $200,000. It is apparent that the bonds had a:
A) stated rate less than 8%.
B) stated rate greater than 8%.
C) market rate less than 8%.
D) market rate greater than 8%.

Question

Quizplus · Accepted Answer

The bonds were sold for more than their face value, indicating they were sold at a premium. This occurs when the stated interest rate on the bonds is greater than the market interest rate (8% in this case).

Bonds with a Face Value of $200,000 Were Sold at an Effective