Question

6. Callable bonds may be

   1. Turned in for early retirement at the option of the bondholder

   2. Converted to common stock at the option of the bondholder

   3. Called for early retirement at the option of the issuer

   4. Converted to registered bonds at the option of the company president

   5. None of the above is correct

7. If the effective (market) interest rate for a bond is higher than the stated interest rate, the bond will sell at

   1. A discount

   2. A premium

   3. Par

   4. Both a and b are correct

   5. None of the above is correct

8. If a bond payable is sold (issued) at a discount, the amount of the carrying value (the long term liability) reported on the subsequent balance sheets

   1. Remains constant

   2. Increases each year

   3. Decreases each year

   4. Changes from year to year depending upon the market rate of interest each year

   5. None of the above is correct

9. On January 1, 2006, Broker Corp. issued $300 000 par value at %12, 10 year bonds which pay interest each December 31. If the market rate of interest was 14%, the issue price of the bonds should be? (The present value factor for $1 in 10 periods at 12% is 0.3220 and at 14% is 0.2697. The present value of an annuity of $1 factor for 10 periods at 12% is 5.6502 and at 14% is 5.2161).

   1. $3339 084

   2. $2843 172

   3. $3000 000

   4. $2686 896

   5. None of the above is correct

Answer 1