McMillan company issued a 300000 bond with a stated rate of 8%. which of the following...

Question

Question

McMillan company issued a 300000 bond with a stated rate of 8%. which of the following is a possible term of cash recieved

Answer 1

Answer #1

When effective interest rate is less than stated rate, then price of the bonds is greater than face value.

SO, when bond is issued at 7% effective interest rate, then price of the bonds should be more than $ 300000, therefore, statement A is incorrect.

When effective interest rate is more than stated rate, then price of the bonds is less than face value.

SO, when bond is issued at 9% effective interest rate, then price of the bonds should be less than $ 300000, therefore, statement B is correct.

When effective interest rate equals to stated rate, then price of the bonds equals to face value.

SO, when bond is issued at 8% effective interest rate, then price of the bonds should be equal to $ 300000, therefore, statement C is incorrect.

When effective interest rate is more than stated rate, then price of the bonds is less than face value.

SO, when bond is issued at 10% effective interest rate, then price of the bonds should be less than $ 300000, therefore, statement D is incorrect.

Answer 2

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