Which combination of True and False is correct? 1) A company is considering offe

Question

Which combination of True and False is correct? 1) A company is considering offering for sale one of two bond issues. The two bond issues are equivalent except that one bond pays semi-annual interest while the other bond pays annual interest. The proceeds from the sale of the bond with semi-annual interest payments will be greater than the proceeds from the sale of the bonds with annual payments. 2) When interest rates have increased and bonds are retired before maturity, market value is below carrying value generating an accounting loss. Select one: OA. 1) True and 2) False O B. 1) False and 2) True O C. 1) False and 2) False o D. 1) True and 2) True

Explanation / Answer

1) Yes, When the bond paid semi annnually then interest rait cumulative is alsways more then the interest rate received annually because interest received early carrying interest rate which are not received in annual interest.

So this statement is true.

2) When interest is increased then the bonds market price will be reduce but not retired before maturity and there is no accounting loss so this statement is False

As per The Above,

Answer = Option A = !) True 2) False

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