A company is considering offering for sale one of two bond issues.The two bond issues are equivalent except that one bond pays semi-annual interest while the other bond pays annual interest.The proceeds from the sale of the bond with annual interest payments will be greater than the proceeds from the sale of the bonds with semi-annual payments.

Question

Quizplus · Accepted Answer

This statement is false. All else being equal, the proceeds from the sale of a bond with semi-annual interest payments are typically higher than the proceeds from the sale of a bond with annual interest payments, because investors prefer to receive more frequent interest payments.

A Company Is Considering Offering for Sale One of Two