Reference no: EM131891565

True or False

1. A rise in the market interest rate will cause the market value of a financial instrument such as a bond to rise.

2. When the yield to maturity of a bond is the same as the coupon rate of the bond, the bond is sold at par.

3. When the market interest rate is above the coupon rate, a bond sells at a premium.

4. When the market interest rate is below the coupon rate, a bond sells at stated face value.

5. A company is considering offering for sale one of two bond issues. The two bond issues are equivalent except that one bond pays semi-annual interest while the other bond pays annual interest. The proceeds from the sale of the bond with annual interest payments will be greater than the proceeds from the sale of the bonds with semi-annual payments.

6. bond discount is a liability valuation account

7. Annual amortization of bond discount results in an increase in interest expense and the bond's carrying value.

8. When bonds were initially sold at a discount, interest expense increases as the bonds reach maturity.

9. As a bond matures, annual amortization of bond premium increases while annual interest expense decreases.

10. Annual amortization of bond discount increases as a bond matures.

11. The annual amortization of bond discount and bond premium increases as the bond matures.