Choose the appropriate letter to match the term and the definition. Not all defi
ID: 2797967 • Letter: C
Question
Choose the appropriate letter to match the term and the definition. Not all definitions will be used.
Term:
1. _____ Convertible
2. _____ Carrying value
3. _____ Discount
4. _____ Callable
5. _____ Maturity
6. _____ Market interest rate
7. _____ Stated interest rate
8. _____ Premium
Definition:
A. A bond feature that changes the interest rate on the bond with market conditions.
B. When a bond is issued for a price less than its face value.
C. Also known as the face value or par value of a bond.
D. A bond with the feature that allows creditors to exchange the bond for company stock.
E. The interest rate printed on the bond certificate.
F. A bond with the feature that lets creditors examine financial data and demand new loan conditions.
G. The amount a company receives when it sells a bond; also known as issue price.
H. When a bond is issued for a price greater than its face value.
I. A bond with the feature that allows the borrowing company to pay off a bond whenever it wishes.
J. Rate of interest that investors demand from a bond.
K. The time at which the face value of a bond must be paid to the lender.
L. Is multiplied by the market interest rate to calculate the (effective) interest expense on a bond.
Explanation / Answer
Term:
1. _____ Convertible: A bond with the feature that allows creditors to exchange the bond for company stock.
2. _____ Carrying value: Is multiplied by the market interest rate to calculate the (effective) interest expense on a bond.
3. _____ Discount: When a bond is issued for a price less than its face value.
4. _____ Callable: A bond with the feature that allows the borrowing company to pay off a bond whenever it wishes.
5. _____ Maturity: The time at which the face value of a bond must be paid to the lender.
6. _____ Market interest rate: Rate of interest that investors demand from a bond.
7. _____ Stated interest rate: The interest rate printed on the bond certificate.
8. _____ Premium: When a bond is issued for a price greater than its face value.