Reference no: EM132315420

Question

____ 1. Bond X and Bond Y are both issued by the same company. Each of the bonds has a maturity value of $100,000 and each pays a stated rate of interest of 8%. The current market rate of interest is 8% for each. Bond X matures in 7 years while Bond Y matures in 10 years. Which of the following is correct? A) Both bonds will sell for the same amount. B) Both bonds will sell for more than $100,000. C) Bond X will sell for more than Bond Y. D) Bond Y will sell for more than Bond X.

_____ 2. On July 1, 2018, Alabama Company issued 10% bonds dated July 1, 2018, with a face amount of $20 million. The bonds mature in 10 years. For bonds of similar risk and maturity, the market yield is 11%. Interest is paid semiannually, on June 30th and December 31st. The issue price of the bonds on July 1, 2018 is closest to?

_____ 3. On January 1, 2018, Idaho Company issued 11% bonds, dated January 1st with a face amount of $800,000. The bonds sold for $739,820 and mature in 20 years. For bonds of similar risk and maturity the market yield was 12%. Interest is paid semiannually on June 30 and December 31. Idaho decides to amortize the bond discount under the straight line approach and elects the option to report these bonds at their fair value. On December 31, 2018, the fair value of the bonds was $730,000, and the change in fair value was a result of a change in general interest rates. The gain or loss Idaho Company would report on its 2018 income statement relative to the bonds is closest to?