If a Debenture's Stated Interest Rate Is Lower Than the Market

question 8

Multiple Choice

If a debenture's stated interest rate is lower than the market rate,which of the following is TRUE?

• A)The debenture will be issued for an amount higher than the maturity value.
• B)The debenture will be issued at a discount.
• C)The debenture will be issued at a premium.
• D)The debenture will be issued at par.

---

Definitions:

Current Ratio

A financial metric indicating the capacity of a business to meet its obligations due within the next year, determined by dividing its current assets by its current liabilities.

Acid-Test Ratio

The acid-test ratio is a liquidity metric that measures a company's ability to cover its short-term liabilities with its quick assets (excluding inventory).

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time.

Bonds Payable

Long-term liabilities represented by written promises to pay a specific sum of money, plus interest, at a future date.