In Present Value Calculations, the Process of Determining the Present

question 15

Multiple Choice

In present value calculations, the process of determining the present value is called

• A)allocating.
• B)pricing.
• C)negotiating.
• D)discounting.

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Definitions:

Bonds

Financial instruments representing a loan made by an investor to a borrower, often corporate or governmental, that pays periodic interest and the principal at maturity.

Face Value

The amount the corporation must repay to the bondholder at the maturity date.

Interest

The cost of using money for a period of time.

Convertible Bonds

These are corporate bonds that holders can convert into a predetermined number of shares of the issuing company's stock, combining features of both debt and equity.