On January 2, 2010, McGowan Corporation issued 20-year bonds payable with a face value of $300,000 and a face interest rate of 8 percent. The bonds were issued to yield a market interest rate of 9 percent. Interest is payable annually on January 2 . In calculating the present value of the bond issue of January 2, 2010, the
a. 9 percent rate will be used to calculate the present value of the face amount and the 8 percent rate will be used to calculate the present value of the periodic interest payments.
b. 9 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.
c. 8 percent rate will be used to calculate the present value of the face amount and the present value of the periodic interest payments.
d. 8 percent rate will be used to calculate the present value of the face amount and the 9 percent rate will be used to calculate the present value of the periodic interest payments.
B
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