Eaton Company issued $5 million of bonds with a 10% coupon rate of interest. When Eaton issued the bonds,the market rate of interest was 11%.Which of the following statements is correct?
A) The bonds were issued at a premium.
B) Annual interest expense will exceed the company's actual cash payments for interest.
C) Annual interest expense will be $500,000.
D) The book value of the bond will decrease as the bond matures.
Correct Answer:
Verified
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