If a Company Issues a Note Payable When the Market

question 61

Multiple Choice

If a company issues a note payable when the market rate of interest is greater than the stated rate, then

• A)the cash received will exceed the maturity value of the note.
• B)the note will be issued at a discount.
• C)the note will be issued at a premium.
• D)the cash received will be equal to the maturity value of the note.

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Definitions:

Interest

A charge for borrowed money, generally a percentage of the amount borrowed.

Maturity Value

The total amount payable to an investor at the end of a fixed-income security's life, including both the principal and interest.

Interest-bearing

Describes a financial instrument or account that generates interest income over time.

Notes Receivable

Claims against debtors documented through promissory notes that promise future payment of money.