The principal amount a corporation promises to repay at maturity when borrowing funds is considered a bond’s__________?
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Answer: D. Par value
Explanation
The face value or principal amount that a corporation promises to repay at maturity is known as the bond par value. This baseline figure serves as the foundation for calculating all periodic coupon interest payments. When the bond reaches maturity, the issuer returns this exact par value amount to the final holder. Par value is typically established at standard amounts such as one thousand dollars per individual bond. Secondary market bond prices fluctuate above or below par value depending on prevailing interest rate trends. Bonds trading above par are selling at a premium while those below par trade at a discount.
Bond value is a vague expression that fails to use the precise financial term for principal repayment. Per value is a phonetic misspelling of par value with no official recognition in financial literature. State value is an incorrect terminology that does not describe corporate debt principal repayment amounts.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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