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 firm.

Question

Quizplus · Accepted Answer

This is true because the market price of a debt security is based on the present value of the expected cash flows, and the current cost of the security to the firm is equal to the market price.

If One Observes the Market Quoted Price of a Debt