Which of the Following Statements Is TRUE About a Debenture

question 41

Multiple Choice

Which of the following statements is TRUE about a debenture that is issued at a premium?

• A)It will be sold above par.
• B)Its interest rate is lower than the prevailing market rate.
• C)It will be sold at par.
• D)It will repay principal at more than the face value.

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Definitions:

Annuity

A financial instrument designed to distribute a steady series of disbursements to a person, commonly utilized as a source of income during retirement.

Amortize

To amortize is to gradually reduce or write off the cost or value of an intangible asset through systematic charges to income over its estimated useful life.

Compounded Monthly

A method of calculating interest where the interest earned or paid is added to the principal so that the next interest calculation includes prior interest.

End of Year Annuity

A series of equal payments made at the end of consecutive periods over a fixed length of time.