CFA Practice Question

There are 520 practice questions for this study session.

CFA Practice Question

Assume U.S. GAAP. At the beginning of the year, a company issues a $1,000 face value, semi-annual coupon, bond with an 8% coupon rate maturing in 10 years. The annual market rate of interest at issuance was 12%. The initial liability recorded for this bond is closest to ______.
A. $718
B. $771
C. $779
Explanation: The liability recorded is based on market rate of interest when the bond is issued and not the coupon rate on the bond. The market value of the bond at issuance was $770.60. (FV=1,000, PMT=40, N=20, I=6.0)

User Contributed Comments 0

You need to log in first to add your comment.