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

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

Financial Accounting

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

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Multiple Choice

A bond is issued at par value when:

the coupon rate is higher than the market interest rate

the coupon rate equals the market interest rate

the bond is sold at a price above its face value

the coupon rate is lower than the market interest rate

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Verified step by step guidance

Understand the concept of a bond issued at par value: A bond is issued at par value when its selling price is equal to its face value. This occurs when the coupon rate (the interest rate stated on the bond) matches the market interest rate.

Analyze the relationship between the coupon rate and the market interest rate: If the coupon rate is higher than the market interest rate, the bond will be sold at a premium (above its face value). If the coupon rate is lower than the market interest rate, the bond will be sold at a discount (below its face value).

Identify the correct condition for issuing a bond at par value: The bond is issued at par value only when the coupon rate equals the market interest rate. This ensures that the bond's price matches its face value.

Review the incorrect options: The bond cannot be issued at par value if the coupon rate is higher or lower than the market interest rate, as this would result in a premium or discount pricing.

Conclude the reasoning: The correct answer is that a bond is issued at par value when the coupon rate equals the market interest rate, as this aligns the bond's price with its face value.