# Gingko Inc. issued bonds with a face value of \$100,000, a rate of 7%, and a 10-yearterm for \$103,000. From this information, we know that the market rate of interest was ________. A. more than 7% B. less than 7% C. equal to 7% D. equal to 1.3%

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 13, Problem 19MC
Textbook Problem
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## Gingko Inc. issued bonds with a face value of \$100,000, a rate of 7%, and a 10-yearterm for \$103,000. From this information, we know that the market rate of interest was ________.A. more than 7%B. less than 7%C. equal to 7%D. equal to 1.3%

To determine

Concept introduction:

Bonds:

are defined as debt instruments which are usually issued by the company that borrows to its lenders. They are issued at a rate of interest that is specified and for a specified period of time. The bondholders receive a fixed rate of interest on the bonds and the repayment of the bonds is made at the maturity date.

Amortization of Bonds discount or premium:

The Bonds can be issued at a discount or premium. The discount or premium on issue of bonds or the life of bonds is amortized using the effective rate methods or the straight line method.

To choose:

The market rate of interest.

### Explanation of Solution

In the given case, the bonds are issued at a price of \$103000 which is more than its face value \$100,000, it means bonds are issued at a premium...

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