Identifying bond premiums and discounts
Required
In each of the following situations, state whether the bonds will sell at a premium or discount.
a.Stokes issued $200,000 of bonds with a stated interest rate of 8 percent. At the time of issue, the market rate of interest for similar investments was 7 percent.
b. Shaw issued $100,000 of bonds with a stated interest rate of 8 percent. At the time of issue, the market rate of interest for similar investments was 9 percent.
c. Link, Inc., issued callable bonds with a stated interest rate of 8 percent. The bonds were callable at 101. At the date of issue, the market rate of interest was 9 percent for similar investments.
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