If the Market Rate of Interest Is Greater Than the Bond's

question 111

Multiple Choice

If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at:

• A)a discount.
• B)par.
• C)a premium.
• D)maturity value.

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Definitions:

Bond Payable

A long-term debt instrument issued by corporations and governments, promising to pay the bondholder a specified sum of money at future dates.

Indirect Method

A method often used in cash flow statements to convert net income into net cash flow from operating activities by adjusting for non-cash transactions and changes in working capital.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue, also known as net earnings or net profit.

Noncash Expense

Expenses that do not directly result in a physical outflow of cash but are recorded in the accounting records, such as depreciation.