If a note receivable was issued at an amount that is less than its face value, then
A) the note was issued at a premium.
B) the note was issued at a discount.
C) the note's stated rate was the same as the prevailing market rate of interest.
D) it must be a zero-interest-bearing note.

Question

Quizplus · Accepted Answer

If a note receivable was issued at an amount that is less than its face value, it means that it was issued at a discount. This is because the stated rate of the note is higher than the prevailing market rate of interest, and investors require a discount to compensate them for the difference in rates. Therefore, the note is sold for less than its face value to give the investor a yield that is equivalent to the market rate of interest.

If a Note Receivable Was Issued at an Amount That