Acorporation issues for cash $1,000,000 of 10%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 12%. the straight-line method is adopted for the amortization of bond discount or premium. which of the following statements is true?
a. the bonds will be issued at a premium. b. the amount of the annual interest expense is computed at 10% of the bond carrying amount at the beginning of the year. c. the amount of unamortized discount decreases from its balance at issuance date to a zero balance at maturity. d. the amount of the annual interest expense gradually decreases over the life of the bonds.

Suppose that two firms produce differentiated products and compete in prices. as in class, the two firms are located at two ends of a line one mile apart. consumers are evenly distributed along the line. the firms have identical marginal cost, $60. firm b produces a product with value $110 to consumers.firm a (located at 0 on the unit line) produces a higher quality product with value $120 to consumers. the cost of travel are directly related to the distance a consumer travels to purchase a good. if a consumerhas to travel a mile to purchase a good, the incur a cost of $20. if they have to travel x fraction of a mile, they incur a cost of $20x. (a) write down the expressions for how much a consumer at location d would value the products sold by firms a and b, if they set prices p_{a} and p_{b} ? (b) based on your expressions in (a), how much will be demanded from each firm if prices p_{a} and p_{b} are set? (c) what are the nash equilibrium prices?

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