A Debenture Will Be Issued at Par Value

question 52

Multiple Choice

A debenture will be issued at par value:

• A) because that is the offer price; if the rate offered is too low the offer will be under-subscribed, so those who take it up will receive more interest.
• B) on most occasions, because management is careful to issue the debentures at an amount close to the market rate.
• C) on those rare occasions when the coupon rate is the same as the market rate.
• D) on those occasions when the offer rate is equal to the coupon rate.

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Definitions:

Present Consumption

The act of using goods and services for immediate needs or desires, rather than saving or investing for future use.

Future Consumption

Planning or saving for the purchase of goods and services in the future, often involving trade-offs between current and future spending.

Currency Intervention

A government’s buying and selling of its own currency or foreign currencies to alter international exchange rates.

Foreign Exchange

The market where currencies are traded, allowing for the conversion of one currency into another.