A-The discount or premium will be fully amortized at maturity, the carrying value of the bonds will be equal to bonds market value.

True

False

B- Amortizing a bond discount:

	a.	Decreases the market value of the Bonds Payable.
	b.	Reduces the bond discount to zero over the bond life.
	c.	Decreases cash flows from the bond.
	d.	Increases the market value of the Bonds Payable.

C- If the market rate of bonds is higher than the contract rate, the bonds sell at price higher than par value.

True

False

D-A 10-year bond issue with a $100,000 par value, 8% annual contract rate, with interest payable semiannually means that the issuer must repay $100,000 at the end of 10 years and make 20 semiannual interest payments of $4,000 each.

True

False

E- A company issued 10-year, 8% bonds with a par value of $400,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. The company received $413,896 in cash proceeds. Which of the following statements is true?

	a.	The company must pay $400,000 at maturity plus 20 interest payments of $16,000 each.
	b.	The company must pay $400,000 at maturity and no interest payments.
	c.	The company must pay $413,896 at maturity plus 20 interest payments of $16,000 each.
	d.	The company must pay $400,000 at maturity plus 20 interest payments of $15,000 each.