A debt is said to be selling at par, when the _____ of the debt is equal to the _____.

Question

Quizplus · Accepted Answer

A debt is said to be selling at par when the market value of the debt is equal to the face value of the debt. This means that the bond or security is being sold at its original issuing price and there is no premium or discount on the face value. Option D correctly identifies this relationship. Option A is incorrect because the discounted value of the interest payments may or may not be equal to the par value. Option B refers to a zero coupon bond, which is issued at a discount and does not pay interest. Option C refers to a call provision, which allows the issuer to redeem the debt before maturity at a premium price. Option E refers to the value at maturity, which may or may not be equal to the par value.

A Debt Is Said to Be Selling at Par, When