Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

When a bond is purchased at a price above its face value, the excess amount paid is referred to as:

Par value

Discount

Coupon

Premium

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Understand the concept of bond pricing: Bonds can be purchased at face value (par), below face value (discount), or above face value (premium). The price depends on market conditions and the bond's interest rate relative to prevailing rates.

Define 'premium': A bond is purchased at a premium when its price exceeds its face value. This happens when the bond's coupon rate (interest rate) is higher than the current market interest rate, making it more attractive to investors.

Differentiate between the terms: 'Par value' refers to the bond's face value, 'Discount' refers to a bond purchased below its face value, and 'Coupon' refers to the periodic interest payment made to bondholders.

Relate the excess amount paid to the term 'premium': The premium represents the additional amount paid above the bond's face value, reflecting its higher desirability due to favorable interest terms.

Conclude that the correct term for the excess amount paid above the bond's face value is 'Premium,' as it aligns with the definition and context provided.