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.

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Definitions:

Mother

A woman in relation to her child or children, to whom she has given birth or who she is raising with a maternal role.

Subbranding

The practice of creating a secondary brand within a main brand to appeal to different market segments or highlight particular product qualities.

Corporate Brand

The overall identity of a corporation that reflects its values, reputation, and products, recognized and valued by consumers.