Final answer:
The statement is true; interest income from New York state bonds is generally exempt from federal taxes and should be excluded from taxable income. In a situation where interest rates rise, the market value of existing bonds typically decreases, so a bond would likely sell for less than its face value.
Step-by-step explanation:
The assertion that the company has $10,000 of interest income from New York state bonds that are included in book income, but should be excluded from taxable income is True. Generally, interest income from state and municipal bonds is exempt from federal income taxes. Therefore, while this income is recognized in financial accounting as part of book income, it should be omitted when calculating federal taxable income.
Regarding the change in interest rates and their effect on the price someone might pay for a bond, if interest rates have increased from 6% to 9%, you would generally expect to pay less than $10,000 for the bond. This is because the bond's fixed interest payments are now less attractive compared to the higher rates available elsewhere, making the bond's price drop to offer a yield competitive with current market rates.