CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Which one of the following best illustrates the relationship between the face amount of a non-interest-bearing note and its 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.
Correct Answer: C

The face amount of the note includes imputed interest and is greater than the present value, which is the known or implied cash price.

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.
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