Which of the following statements is correct?
A)Bonds are issued at a price calculated by using the present value of the stated rate of interest on the day the bond is purchased.
B)If the face rate of interest on a bond is not equal to the market rate of interest,then the company desiring to issue the bonds must reprint its bond certificates.
C)The actual issue price of a bond represents the present value of all future cash flows related to the bond.
D)The market rate of interest has no bearing on the selling price of the bonds.

Question

Quizplus · Accepted Answer

The actual issue price of a bond represents the present value of all future cash flows related to the bond, including both the principal amount and the periodic interest payments. This calculation is based on the market rate of interest at the time of issuance, not the stated rate of interest on the bond. Therefore, statement A is incorrect. Statement B is also incorrect, as the company can simply adjust the stated rate of interest to align with the market rate without reprinting the certificates. Statement D is incorrect, as the market rate of interest is a major factor in determining the selling price of bonds.

Which of the Following Statements Is Correct