Answer:
The selling price of the bond is $6,154
Explanation:
Given data
face value = $5,000
interest = 8% of face value
rate = 6.5%
To determine
the bond's selling price
solution
we will calculate the interest associated with
interest = 8% of face value
interest = 8% × 5,000
interest = 400
Let’s assume the bond’s selling price is x
where
the bond selling equation will be
interest = rate × bond selling price
400 = 0.065 × x
x = 6,154
Thus, the bond’s selling price is $6,154
Answer: The assertion in the question is false.
Explanation: In calculating interest expenses using the effective interest rate method of amortization, the market interest rate is applied, multiplied by the bond value at the start of the respective period. The question incorrectly states that the face value is considered, which is inaccurate.
Thus, the claim in the question is false.
