Accounting Managerial Zero Bono

Question

For a zero-coupon bond:

	A.	The coupon rate is lower than the market rate
	B.	The cash received from investors is less than the bond's face value
	C.	Amortization of bond discount equals to the interest expense
	D.	The bond's net book value rises over time
	E.	All of the above

QUESTION 9

1. For a bond issued at a premium:

	A.	Net book value increases over time
	B.	Net book value decreases over time
	C.	Coupon payment is greater than interest expense
	D.	Coupon payment is lower than interest expense
	E.	B and C

Answer 1

Zero coupon cash received from investor is less than face value. since investor does not receive a coupon, he or she needs to purchase it at a discount in order to make a return after receiving a greater face value amount

Q9 coupon payment is greater than interest expense. the reason why it is issued at a premium is because the coupon rate is greater than the market rate