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1. A bond is issued at a discount is because:

The coupon rate equals the market interest rate

The coupon rate is greater than the market interest rate

The coupon rate is less than the market interest rate

None of the above is accurate

2. Cabaret Company issues 10-year bonds with a face amount of $10 million and a stated interest rate of 6%, paid quarterly. The current market rate for similar bonds is 5%. The price of the bond is:

$10,783,173.

$10,772,173.

$10,000,000.

None of above

3. Cabaret Company issues 10-year bonds with a face amount of $12 million and a stated coupon rate of 5%, paid semi-annually. The current market rate for similar bonds is 6%. The price of the bond is:

$11,107,352.

$11,116,790.

$12,000,000.

Non of above.

4. On September 1, 2021, Sun's Shoe Co. issued $350,000 of 8% bonds. The bonds pay interest semiannually on January 1 and July 1 of each year. The bonds were sold at the face amount. How much cash did Sun's receive upon the sale of the bonds?

$378,000

$364,000

$354,667

$350,000

5. On January 1, 2016, HTL Manufacturers issued $1 million of 8% debentures due 2020 at 106 (106% of face value). Accompanying each $1,000 bond were 50 warrants. Each warrant permitted the holder to buy one share of no-par common stock at $30 per share. Shortly after issuance, the warrants were listed on the stock exchange at $5 per warrant. The common stock's market price is $30 per share on January 1, 2016.

How much equity value does HTL Manufacturers issue in this transaction?

$1,500,000

$250,000

$6,000,000

None of above

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