The Fair Value of Long-Term Debt

question 36

Multiple Choice

The fair value of long-term debt

• A)is the amount the firm would have to pay to repurchase the debt on the market in an orderly transaction on the measurement date.
• B)is the market price of the bonds on that date, if the bonds trade in an active market.
• C)is the present value of the contractual cash payments discounted at the interest rate a lender would require on the measurement date, if the fair value of bonds are not actively traded.
• D)all of the above
• E)none of the above

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Definitions:

Apparent Authority

A situation where a third party reasonably believes that an agent has the authority to act on behalf of a principal, even if the agent does not have such authority.

Principal

In a financial context, the principal is the initial amount of money borrowed or invested, excluding any interest or profit. In an educational setting, it refers to the head of a school.

Agent

An individual authorized to act on behalf of another, often in business or legal matters.

Manifestations

Observable expressions or indications of a condition, disease, or the existence of a particular fact.