Question

If the market rate of interest is 7%, the proceeds of 6% bonds paying interest semiannually with a face value of $300,000 will be a.equal to $300,000. b.less than $300,000. c.greater than or less than $300,000, depending on the maturity date of the bonds. d.greater than $300,000.

Answer 1

b. less than $300,000

Step-by-step explanation:

Based on the information given since the proceeds of 6% bonds is lower than 7% market rate of interest which means that it will lead to a discount reason been that discount will often occur in a situation where the cost of bonds

is lower than the bonds face value which simply indicate that the value of the bonds will be lower than the face value of the amount of $300,000.