Bonds Are Frequently Issued at Amounts Greater or Less Than

question 48

Essay

Bonds are frequently issued at amounts greater or less than face value. Describe how the market rate of interest, relative to the contractual rate of interest, affects the selling price of bonds.

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Definitions:

Debt

Money owed by one party to another under the condition that it is to be repaid, often with interest, at a later date.

Capital Structure

The mix of different forms of external funds used to finance a company's operations, such as debt and equity.

Earnings Per Share

A financial ratio that measures the amount of net income earned per share of stock outstanding.

Cost Of Debt

The effective interest rate that a company pays on its total debt, influencing its finance strategy.