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Basic Question 0 of 4
Which one of the following best illustrates the relationship between the face amount of a non-interest-bearing note and its present value?
B. The relationship depends on the prevailing interest rate.
C. The face note amount is greater than the present value.
A. The face amount of the note is the same as the present value.
B. The relationship depends on the prevailing interest rate.
C. The face note amount is greater than the present value.
User Contributed Comments 7
| User | Comment |
|---|---|
| jgraham6 | I'm assuming "non-interest bearing" means Zero Coupon Bond, yes? |
| yu0825 | I think so, Jgraham |
| dah62 | Surely the prevailing interest rate matters too in terms of discounting? |
| charlie1 | yes the prevailing interest rate matters but no matter what that is (unless it's a negative number) C holds true. |
| YOUCANDOIT | zero coupon bonds are issued at a discount |
| sheridanla | Answer C assumes a positive interest rate |
| houstcarr | C is dead wrong in the modern era, pull up a Swiss gov't zero on your BB. Answer is B. |
I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
determine the initial recognition, initial measurement and subsequent measurement of bonds;
describe the effective interest method and calculate interest expense, amortisation of bond discounts/premiums, and interest payments;
CFA® 2024 Level I Curriculum, Volume 3, Module 25.