Bonds issued at a premium reduce:
A) the bond value to be shown on the balance sheet.
B) the perceived risk to the bondholder.
C) the cost of borrowing.
D) the interest payments to be made to the bondholder.

Question

Quizplus · Accepted Answer

Bonds issued at a premium have a higher face value than the amount of cash received, which reduces the cost of borrowing for the issuer. This is because the issuer is able to obtain more funds at a lower effective interest rate. However, it does not affect the bond value to be shown on the balance sheet or the interest payments to be made to the bondholder. Additionally, it may not necessarily reduce the perceived risk to the bondholder.

Bonds Issued at a Premium Reduce