If a entity sells bonds at a premium: The bonds' contract rate is less than the...
If a entity sells bonds at a premium:
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The bonds' contract rate is less than the market rate at issuance. |
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The bonds' contract rate is the same as the markets at issuance. During the bonds' term, the market rate changes and is becomes lower than the bonds' contract rate. |
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The bonds' contract rate is higher than the market rate at issuance. |
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The bonds' contract rate is the same as the market rate at issuance. |
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The bonds' contract rate is lower than the market rate at issuance and changes during the term of the bond to become higher than the bond's contract rate. |
Homework Answers
Answer
- Correct Answer = Option #3
The Bonds’ contract rate is HIGHER than the market rate at issuance. - This is because if contract rate is HIGHER than market rate, this means that bond holders will receive ‘interest income’ HIGHER than what they would have earned, had they invested in market.
- For paying this HIGHER interest income, the bond issuer charges the PREMIUM and hence the entity sells the bonds at a premium.
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If a entity sells bonds at a premium:
The bonds' contract rate is less than the...
1. Bond A sells at a premium, so the YTM must be less than the coupon...
1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...
when contract rate of interest on bonds is less than the market rate the inteest the...
when contract rate of interest on bonds is less than the market rate the inteest the bond sell at
if a bonds coupon rate is greater than market, then the bond will sell at price...
if a bonds coupon rate is greater than market, then the bond
will sell at price
QUESTION 3 If a bond's coupon rate is greater than market rate, then bond will sell at price than its face value; these are called bonds. less, discount less, premium more, premium more, discount Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All A
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1)Which one of these definitions is correct? Premium bond: bond that sells for less than face value Unfunded debt: long-term corporate debt Dirty price: market price, excluding accrued interest Negative covenant: a "thou shalt" agreement Call provision: issuer's right to repurchase a bond prior to maturity 2) A convertible bond can be exchanged for a newly issued bond if it carries a higher coupon rate. any other outstanding bond. shares of company stock. a new bond if the current bond’s...
Please solve clearly and explain all steps A discount bond sells for less than par. This...
Please solve clearly and explain all steps
A discount bond sells for less than par. This means the Yield to Maturity is... ...is a premium bond rate. ...is equal to the coupon rate. ...higher than the coupon rate. ...lower than the coupon rate.
6) Which of the following statements about bonds is true? A) If market interest rates are...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
If the entity is offering a higher interest rate on debentures than the market believes is...
If the entity is offering a higher interest rate on debentures than the market believes is appropriate, the market will: Be prepared to pay more than the par value of the debentures, offering a discount. Be prepared to pay less than the par value of the debentures, offering a discount. Be prepared to pay more than the par value of the debentures, offering a premium. Be prepared to pay less than the par value of the debentures, offering a premium.
Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July...
Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $48,500,000 of 10-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $51,522,110. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the...
............... Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On...
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Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $32,200,000 of 10-year, 13% bonds at a market (effective) interest rate of 12%, receiving cash of $34,046,503. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize...
1. Bond A sells at a premium, so the YTM must be less than the coupon rate. Assume the required rate of return remains constant when we're trying to determine the likelihood of a call being made. If the YTM stays less than the 9% coupon rate, then 5 years from now when the call protection ends, the bond issuer will call the bond, pay the call premium, and refinance with new bonds at lower market rates. Thus, the market...
if a bonds coupon rate is greater than market, then the bond
will sell at price
QUESTION 3 If a bond's coupon rate is greater than market rate, then bond will sell at price than its face value; these are called bonds. less, discount less, premium more, premium more, discount Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All A
When a bond sells at a premium Multiple Choice The contract rate is above the market rate The contract rate is equal to the market rate The contract rate is below the market rate It means that the bond is a zero coupon bond. The bond pays no interest.
Please solve clearly and explain all steps
A discount bond sells for less than par. This means the Yield to Maturity is... ...is a premium bond rate. ...is equal to the coupon rate. ...higher than the coupon rate. ...lower than the coupon rate.
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
If the entity is offering a higher interest rate on debentures than the market believes is appropriate, the market will: Be prepared to pay more than the par value of the debentures, offering a discount. Be prepared to pay less than the par value of the debentures, offering a discount. Be prepared to pay more than the par value of the debentures, offering a premium. Be prepared to pay less than the par value of the debentures, offering a premium.
...............
Bond Premium, Entries for Bonds Payable Transactions Rodgers Corporation produces and sells football equipment. On July 1, 20Y1, Rodgers issued $32,200,000 of 10-year, 13% bonds at a market (effective) interest rate of 12%, receiving cash of $34,046,503. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize...
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