A Debenture Is Sold for an Amount Less Than Its

question 13

Multiple Choice

A debenture is sold for an amount less than its face value.Which of the following statements would explain why?

• A)The debenture's stated rate is higher than the prevailing market rate at time of sale.
• B)The debenture is not secured by specific assets of the issuer.
• C)The debenture's stated rate is lower than the prevailing market rate at time of sale.
• D)The debenture's stated rate is the same as the prevailing market rate at time of sale.

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Definitions:

Premium

The amount paid for an insurance policy or an amount paid over the face value of bonds.

Debt-To-Equity Ratio

A financial benchmark that shows the ratio between debt and shareholders' equity in asset financing.

Prepaying Bonds

The action of repaying the principal of a bond before its maturity date, often as a way to manage debt or save on interest costs.

Outstanding Bonds

Bonds issued by an entity that are currently not redeemed and are in the hands of investors.