A Debenture Will Be Issued at Par Value

question 34

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.
• E) None of the given answers.

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Definitions:

Demand

Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a given time period.

Indifference Curves

Graphs used in economics to show combinations of two goods that provide equal satisfaction and utility to a consumer.

Budget Line

A graphical representation of all possible combinations of two goods which can be purchased with a given budget at fixed prices.

Utility Function

A utility function is a mathematical representation in economics that depicts an individual's preference ranking over a set of goods or outcomes, showing the level of satisfaction or utility derived from them.