Question

Green Roof Inns is preparing a bond offering with a 6 percent, semiannual coupon and a face value of $1,000. The bonds will be repaid in 10 years and will be sold at par. Given this, which one of the following statements is correct?a. The bonds will become discount bonds if the market rate of interest declines.b. The bonds will pay 10 interest payments of $60 each.c. The bonds will sell at a premium if the market rate is 5.5 percent.d. The bonds will initially sell for $1,030 each.e. The final payment will be in the amount of $1,060.

Answer 1

Green Roof Inns is preparing a bond offering with a 6 percent, semiannual coupon and a face value of $1,000. The bonds will be repaid in 10 years and will be sold at par.-The correct statement is -The bonds will sell at a premium if the market rate is 5.5

Explanation:

The important point to be noted from the given question is that the bond is offered when the market rate is 6 percent.

So ,the bonds are said to selling at premium since the market rate has reduced from 6% to 5.5%

In this case it is right to say that -Green Roof Inns is preparing a bond offering with a 6 percent, semiannual coupon and a face value of $1,000. The bonds will be repaid in 10 years and will be sold at par.-The correct statement is -The bonds will sell at a premium if the market rate is 5.5