If a Company Sells Its Bonds at Less Than Face

question 79

Multiple Choice

If a company sells its bonds at less than face value, the effective interest rate is

• A)lower than the contract interest rate
• B)higher than the contract interest rate
• C)equal to the contract interest rate
• D)higher than the market interest rate

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Definitions:

ABC

Can refer to Activity-Based Costing, a method of assigning costs to products or services based on the resources they consume.

Activities

In a business context, activities refer to the various tasks, operations or functions performed within the organization to achieve its objectives.

Drive Costs

Strategies or actions taken to reduce, control, or manage expenses in a business to improve profitability.

Plantwide Overhead Rate

A single overhead absorption rate calculated for an entire manufacturing plant, applied uniformly to all units produced.