When a Corporation Issues Share at a Price Higher Than

question 51

Multiple Choice

When a corporation issues share at a price higher than the par value:

• A) The amount received over par value increases retained earnings.
• B) The entire issue price is credited to the Share Capital account.
• C) The amount received in excess of par value constitutes profit to the issuing corporation.
• D) The amount received in excess of par value becomes part of issued and fully paid capital.

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Definitions:

Maturity Date

The date when the bond’s par value is repaid to the bondholder. Maturity dates generally range from 10 to 40 years from the time of issue.

Default Probability

The likelihood that a borrower will be unable to meet debt obligations, leading to a default on the obligation.

Annual Coupon

The interest payment made by a bond issuer to the bondholders, usually annually.

Yield To Maturity (YTM)

The rate of interest earned on a bond if it is held to maturity.