Asked by Feryal Rushdan on Apr 28, 2024
Verified
Refer to Exhibit 14-4.These bonds sold at
A) a premium
B) a discount
C) par
D) cannot be determined from the information given
Present Value
The present-day evaluation of a future financial amount or cash flow streams, using a predetermined rate of return.
Actuarial Information
Data used by actuaries to calculate and assess risks, premiums, liabilities, and retirement benefits, based on statistical and mathematical models.
Bond Issue
A bond issue refers to the process by which a borrower issues bonds to investors in order to raise capital, under specific terms regarding the repayment of the principal and periodic interest payments.
- Apprehend the role of actuarial insights in identifying the discount or premium values of bonds.
- Differentiate the features of bonds issued below par value, at par value, and above par value.
Verified Answer
GM
Gillian MendezMay 04, 2024
Final Answer :
B
Explanation :
The bonds were sold to yield 7%, which is higher than the coupon rate of 6%. This means the bonds were sold at a discount, as investors are willing to pay less than the face value to achieve a higher yield.
Learning Objectives
- Apprehend the role of actuarial insights in identifying the discount or premium values of bonds.
- Differentiate the features of bonds issued below par value, at par value, and above par value.