A Government Has Elected to Issue New Debt and Use

question 13

Multiple Choice

A government has elected to issue new debt and use the proceeds to redeem existing debt because there is an economic gain in doing so. There is, however, an "accounting loss" associated with these events. The accounting loss is defined as

• A) The present value of the principal and interest payments on the new debt less the present value of the principal and interest payments on the old debt.
• B) The present value of the principal and interest payments on the old debt less the present value of the principal and interest payments on the new debt.
• C) The cash paid to redeem the old debt less the book value of the old debt.
• D) The face value of the new debt less the cash paid to redeem the old debt.

---

Definitions:

Changing Patterns

Modifications or alterations in behavior, habits, or occurrences.

Expenditures

The amount of money spent on goods, services, or other expenses.

Campus Violence

Acts of violence that occur on the premises of educational institutions like schools and universities.

Socioeconomic Status

An individual's or family's economic and social position in relation to others, based on income, education, and occupation.