Which statements is true with regard to early retirement

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Problem 1: Bennington Corp. issued a $40,000, ten-year bond at the face rate of 8%, paid semiannually. How much cash will the bond investors receive at the end of the first interest period?

a. $3,200
b. $1,600
c. $4,000
d. $800

Problem 2: Which of the following statements is true with regard to early retirement of bonds?

a. It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount.
b. Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates.
c. Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company.
d. If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss.

Reference no: EM132826423

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