QUESTIONS 45 THROUGH 68 RELATE TO FINANCIAL STATEMENT ANALYSIS

67. Assume U.S. GAAP (generally accepted accounting principles) applies unless

otherwise noted.

At the beginning of the year, a company issues a $1,000 face value, semiannual

coupon, bond with an 8 percent coupon rate maturing in 10 years. The annual

market rate of interest at issuance was 12 percent. The initial liability recorded

for this bond is closest to:

A. $771.

B. $774.

C. $1,000.