Question

A company wishes to raise $50 million to support expansion opportunities, and plans to issue a...

A company wishes to raise $50 million to support expansion opportunities, and plans to issue a $50 million face value, 20-year, 6% bond. Which of the following statements is false?

The company will always receive cash of exactly $50 million.

The company may receive more than $50 million of cash.

The company may receive less than $50 million of cash.

None of the above.
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Answer #1

A company wishes to raise $50 million to support expansion opportunities, and plans to issue a $50 million face value, 20-year, 6% bond.

The first statement , The company will always receive cash of exactly $50 million is false.

The company may receive more than $50 million of cash. it will happen when market interest rate is less than stated interest rate of 6%.

The company may receive less than $50 million of cash. It will happen when market interest rate is more than stated interest rate of 6%.

If the market interest rate is equal to stated interest rate of 6%, the company will receive cash of exactly $50 million.

First option is correct.

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