A company deposits funds and receives a NCD promising repayment of $10 million in 90 days.If the company sells the NCD after 25 days at 3.5% they will receive $9 976 084.73.

Question

Quizplus · Accepted Answer

The company would receive more than $10 million because selling the NCD at a 3.5% yield implies it is selling the NCD at a discount rate that would yield the buyer a return of 3.5% over the remaining 65 days, not that the company would receive less than the NCD's face value immediately.

A Company Deposits Funds and Receives a NCD Promising Repayment