Question

Bond prices depend on the market rate of interest, stated rate of interest, and time. Determine whether the following bonds payable will be issued at face value, at a premium, or at a discount:a. The market interest rate is 4%. Denton issues bonds payable with a stated rate of 4%.b. Starkville issued 8% bonds payable when the market interest rate was 8.25%.

Answer 1

Answer:

a. Par value

b. Discount

Explanation:

a. As the market interest rate is 4% and the stated rate is also 4% so that means the bond would be issued at face value because both the rates are same

b. The bond rate is 8% and the market interest rate is 8.25%

so the stated interest rate is lower than the market interest rate, that means the bond would be issued at discount

hence, the same would be considered