A debenture will be issued at par value:
A) because that is the offer price; if the rate offered is too low the offer will be under-subscribed, so those who take it up will receive more interest.
B) on most occasions, because management is careful to issue the debentures at an amount close to the market rate.
C) on those rare occasions when the coupon rate is the same as the market rate.
D) on those occasions when the offer rate is equal to the coupon rate.

Question

Quizplus · Accepted Answer

Debentures are issued at par value when the coupon rate (the interest rate paid by the debentures) matches the prevailing market interest rate. This alignment means investors are receiving a fair return compared to other available investments, making the par value issuance appropriate.

A Debenture Will Be Issued at Par Value