Which One of the Following Prices Is Equal to the Present

question 56

Multiple Choice

Which one of the following prices is equal to the present value of a bond's future cash flows and is paid when a bond is redeemed prior to maturity?

• A)call protected
• B)face value
• C)make-whole call
• D)tender-offer
• E)deferred

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Definitions:

Time Value

A financial principle acknowledging that receiving money now is more advantageous than receiving the same amount in the future due to its earning potential.

Payback Method

A capital budgeting technique that calculates the time required to recoup the initial investment through cash inflows.

Accounting Rate

Often refers to the accounting rate of return (ARR), a financial ratio used to measure the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Investment Allowance

A tax benefit that allows businesses to deduct a percentage of certain capital expenditures from their taxable income.