Match these terms with their definitions.
-Occurs when a bond is issued for an amount that is less than the principal.
A)Bond
B)Contract, coupon, stated rate
C)Discount
D)Effective interest rate method
E)Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question

Quizplus · Accepted Answer

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A bond is issued at a discount when the selling price is less than its face value or principal amount. This typically happens when the market interest rate is higher than the coupon rate of the bond. The discount represents the difference between the bond's face value and the price for which it is sold. Over the life of the bond, this discount is amortized, and the bond's book value increases to its face value by the maturity date.

Match These Terms with Their Definitions