Asked by
Tumee Baatarjav
on Nov 15, 2024
Verified
A bond is issued for an amount equal to its face value. Which of the following statements most likely would explain why?
A) The bond's contract rate is lower than the market rate at the time of the issue.
B) The bond's contract rate is the same as the market rate at the time of the issue.
C) The bond's contract rate is higher than the market rate at the time of the issue.
D) The bond is secured by specific assets of the corporation.
Face Value
The nominal value or dollar value of a security stated by the issuer.
Contract Rate
The agreed-upon interest rate specified in a contract, often related to loans or financial agreements.
Market Rate
The prevailing rate of interest available on investments or the average cost of borrowing money in the market.
- Recognize the variables that impact the cost of bonds and the circumstances of their issuance.
Verified Answer
RA
Learning Objectives
- Recognize the variables that impact the cost of bonds and the circumstances of their issuance.