State Street Beverage Company issues $805,000 of 9%,10-year bonds on March 31,2017.The bonds pay interest on March 31 and September 30.Which of the following statements is TRUE?

Question

Quizplus · Accepted Answer

Since the coupon rate is lower than the market rate of 10%, the bonds will have to be sold at a discount to attract investors. The amount of discount will depend on the present value of the future cash flows from the bond, which in turn depends on the market rate of interest.

State Street Beverage Company Issues $805,000 of 9%,10-Year Bonds on March