If Bonds Are Issued at a Discount, the Issuing Corporation

question 11

True/False

If bonds are issued at a discount, the issuing corporation will pay a principal amount that is less than the face amount of the bonds on the maturity date.

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Definitions:

Call Premium

The extra amount paid above the bond's face value for calling a bond before its maturity date, compensating the bondholder for early redemption.

Restrictive Covenants

Restrictive covenants are terms or conditions included in contracts or agreements that restrict or limit certain actions or behaviors to protect business interests.

Market Interest Rates

The prevailing rates at which interest is paid on borrowings or earned on investments in the financial market.

Call Features

Provisions embedded in financial instruments, like bonds, that allow the issuer to repurchase or redeem the instrument before its maturity date.