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2. For a bond issue which sells for less than face value, the market rate of interest is
3. What is the market rate of interest for a bond issue which sells for more than face
value?
5. Which of the following is true for a bond maturing on a single date when the
effective interest method of amortizing bond discount is used?
7. The market price of a bond issued at a discount is the present value of the principal
amount at the market rate of interest
a. Less the present value of all future interest payments at the market rate of
interest
b. Less the present value of all future interest payments at the rate of interest
stated on the bond
c. Plus the present value of all future interest payments at the market of interest
d. Plus the present value of all the future interest payments at the rate of interest
stated on the bond
9. A five-year term bond was issued by an entity on January 1, 2014 at a discount. The
carrying amount of the bond on December 31, 2015 would be
10. Under international accounting, the valuation method used for bond payable
a. Historical cost
b. Discounted cash flow valuation at current yield rate
c. Maturity amount
d. Discounted cash flow valuation at a yield rate at issuance
ANSWERS:
1. C 6. B
2. C 7. B
3. C 8. C
4. B 9. A
5. A 10. D