The Cases Company issues $800,000 of 7%,10-year bonds on March 31,2013.The bond pays interest on March 31 and September 30.Which of the following statements is TRUE?
A) If the market rate of interest is 8%, the bonds will issue at a premium.
B) If the market rate of interest is 8%, the bonds will issue at a discount.
C) If the market rate of interest is 8%, the bonds will issue at par.
D) If the market rate of interest is 8%, the bonds will issue above par.

Question

Quizplus · Accepted Answer

When the market rate of interest is higher than the coupon rate (7%), the bonds will issue at a discount. Therefore, if the market rate of interest is 8%, the bonds will issue at a discount.

The Cases Company Issues $800,000 of 7%,10-Year Bonds on March