The Principal Value of Debt

question 135

Multiple Choice

The principal value of debt:

• A) is added to the interest payments to get the maturity value of the debt.
• B) must be repaid at some point during the life of the debt to the investors.
• C) is always half of the maturity value of the debt.
• D) is equal to the market value of the debt.
• E) always yields positive returns for investors.

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Definitions:

Price-taker Firm

A firm that has no control over the market price and must accept the prevailing market price for its products.

Marginal Revenue

The extra revenue generated by the sale of an additional unit of a product or service.

Marginal Cost

The cost of producing one additional unit of a product or service.

Average Variable Cost

The total variable expenses divided by the number of units produced, representing the variable cost per unit.