Reference no: EM132826446

Problem 1: Churchill Company planned to raise $100,000 by issuing bonds. The bond certificates were printed bearing an interest rate of 8%, which was equal to the market rate of interest at the time. However, before the bonds could be issued, economic conditions forced the market rate up to 9%. If the life of the bonds is six years and interest is paid annually on December 31, how much will Churchill receive from the sale of the bonds?

a. The bonds would not be sold at all; Churchill Company would have the certificates reprinted bearing the market rate of 9%.
b. Churchill will receive greater than $100,000 because the face rate of interest at 8% was less than the market rate.
c. Churchill will receive less than $100,000 because the market rate of interest at 9% was more than the face rate.
d. Churchill will receive exactly $100,000 because it would still pay interest at the face rate of 8%.