Question

Which of the following four companies will have the lowest carrying value on their bonds if they decide to redeem their bonds before the maturity date? Assume each company’s bonds have a face value of $15 million and 10% of the premium or discount is unamortized at the time of redemption.
A) Company 3 sold their bonds at 102 and redeemed them at 98.
B) Company 2 sold their bonds at 98 and redeemed them at 99.
C) Company 1 sold their bonds at 94 and redeemed them at 106.
D) Company 4 sold their bonds at 103 and redeemed them at 104.

Answer 1

Answer:

C) Company 1 sold their bonds at 94 and redeemed them at 106.

Explanation:

The face value of bond issued in 4 companies are same, then it's clearly that the company 1 will have the lowest carrying value on their bonds because they sold at lowest price but buy back (redeem) at highest prices.