- CFA Exams
- CFA Exam: Level I 2021
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 28. Non-current (Long-term) Liabilities
- Subject 1. Accounting for Bond Issuance, Bond Amortization, Interest Expense, and Interest Payments
CFA Practice Question
The price paid by investors for bonds payable is determined by ______.
B. bond issuers
C. underwriters
A. market conditions
B. bond issuers
C. underwriters
Correct Answer: A
Bonds are priced so that the true rate of interest is equal to the market rate at the time of the bond sale.
User Contributed Comments 4
| User | Comment |
|---|---|
| kalps | Bond price = true rate of interest on bond is same as market at the time of the bond sale |
| guna | Depends whether it is selling at a discount or premium |
| magicchip | In actuality creditworthiness of the issuer is a big factor. There is a risk premium out there, so the question would have bben correct IF it would have said something like "all else equal" |
| javasun | unless specified otherwise you should always assume "all else equal". |