Question

A company issued 10-year, 8% bonds with a face value of $200,000. Interest is paid annually. The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds. Which of the following statements is correct?

A) The company must pay $184,000 at maturity plus $16,000 in interest each year for 10 years.

B) The company must pay $206,948 at maturity plus $15,000 in interest each year for 10 years.

C) The company must pay $200,000 at maturity plus $16,000 in interest each year for 10 years.

D) The company must pay $200,000 at maturity plus $15,000 in interest each year for 10 years.

Answer

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