Ok here is a conceptual question I got right but when I read the answer it was not the same as my reasoning:
Since the effective rate is higher than the coupon rate, the effective interest will be greater than the cash paid to the bondholders. If the stated rate of interest on a bond is less than the effective rate, the bond will sell at a discount. The interest paid is the coupon rate times the maturity value of the bond. The effective interest is the effective interest rate times the carrying value of the bond.
I thought the stated rate was the coupon rate so if a bond is issued for more than the stated rate that it is a Premium, not a Discount as the answer says…maybe I am just mixed up…help??
Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!
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