Obligations incurred by a company when bonds are issued

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Question: 1. Describe the two major obligations incurred by a company when bonds are issued.

2. Assume that Acorn Inc. sold bonds with a face value of $100,000 for $104,000. Was the market interest rate equal to, less than, or greater than the bonds' contractual interest rate? Explain.

3. Lee and Jay are discussing how the market price of a bond is determined. Lee believes that the market price of a bond is solely a function of the amount of the principal payment at the end of the term of a bond. Is he right? Discuss.

Reference no: EM131830731

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