Alexi Co. issued $4.00 million face amount of 7%, 10-year bonds on June 1, 2019. The bonds pay interest on an annual basis on May 31 each year.

Required: a. Assume that the market interest rates were slightly higher than 7% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount?

Multiple Choice

• The bonds will sell for less than their face amount.

• The bonds will sell for more than their face amount.

• The bonds will sell for equal to their face amount.

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Jessie Co. issued $9 million face amount of 13.2%, 30-year bonds on April 1, 2019. The bonds pay interest on an annual basis on March 31 each year.

Required: a. Assume that market interest rates were slightly lower than 13.2% when the bonds were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount?

Multiple Choice

• The bonds will sell for more than their face amount.

• The bonds will sell for less than their face amount.

• The bonds will sell for equal to their face amount.