If one observes the market quoted price of a debt security where the expected cash flows of that security are known, then one can calculate the current cost of that security to the company.

Question

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The market quoted price of a debt security reflects the market's expectation of future cash flows from that security. By knowing the expected cash flows, one can use the market price to calculate the current cost of the security to the company.

If One Observes the Market Quoted Price of a Debt