Asked by Colton Hiler on May 27, 2024
Verified
The proper procedure for computing the issuance price of a bond includes adding the
A) maturity value of the bonds to the accrued interest
B) maturity value of the bonds to the present value of the interest
C) present value of the principal to the accrued interest
D) present value of the principal to the present value of the interest
Issuance Price
The price at which shares or bonds are sold to the public for the first time.
Present Value
The current worth of a future sum of money or stream of cash flows given a specified rate of return, assessing the value today of an amount to be received in the future.
Maturity Value
The total amount payable to an investor at the end of a debt instrument's life, including the principal and any interest.
- Determine the issuance price of bonds and recognize the determinants of bond price fluctuations.
- Distinguish and register bookkeeping entries for bond issuance, interest expense accumulation, and bond amortization activities.
Verified Answer
OG
O'haleon GordonMay 27, 2024
Final Answer :
D
Explanation :
The proper procedure for computing the issuance price of a bond involves calculating the present value of the principal and the present value of the interest payments. Therefore, the correct answer is to add the present value of the principal to the present value of the interest, which is option D.
Learning Objectives
- Determine the issuance price of bonds and recognize the determinants of bond price fluctuations.
- Distinguish and register bookkeeping entries for bond issuance, interest expense accumulation, and bond amortization activities.