Question: Explain why some bonds are issued at a discount and
Explain why some bonds are issued at a discount, and what happens to the carrying value of these bonds between their issuance date and maturity date.
Answer to relevant QuestionsExplain the effect that issuing bonds at a discount has on a company’s interest expense relative to the contact rate of interest. Explain how hybrid pension plans differ from defend benefit pension plans. Explain the difference between a contingent liability and a liability. How do contingent liabilities affect a company’s statement of financial position and statement of income? Distinguish between the contract rate of interest on a bond and the yield (or effective rate). On August 1, 2016, Tra Vinh Corporation issued $120 million 5% bonds, with interest payable on January 31 and July 31 each year. The market yield rate for these bonds on the date of issuance was 4.5% and they were issued at ...
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