Question

If $339,000 of 10% bonds are issued at 96, the amount of cash received from the sale is:

a) $326,040
b) $339,000
c) $325,440
d) $322,560

Answer 1

When there is a change in interest rates, the price of bonds fluctuates. If interest rates increase, the price of existing bonds decreases. Conversely, if interest rates decrease, the price of existing bonds increases.

Step-by-step explanation:

When there is a change in interest rates, the price of bonds fluctuates. If interest rates increase, the price of existing bonds decreases. Conversely, if interest rates decrease, the price of existing bonds increases.

In this scenario, if interest rates are higher than 10%, you would expect to pay less than $339,000 for the bond. However, the exact amount would depend on the specific interest rate and calculations.