Ordinarily, the proceeds from the sale of a bond issue will be equal to: Group of answer choices The present value of the face amount plus the present value of the stream of interest payments. The face amount of the bond. The total of the face amount plus all interest payments. The face amount of the bond plus the present value of the stream of interest payments.

Question

Business

Monserrat Rivas

30 October, 00:39

Ordinarily, the proceeds from the sale of a bond issue will be equal to: Group of answer choices The present value of the face amount plus the present value of the stream of interest payments. The face amount of the bond. The total of the face amount plus all interest payments. The face amount of the bond plus the present value of the stream of interest payments.

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Deandre Wolf · Answer 1

The present value of the face amount plus the present value of the stream of interest payments.

Explanation:

The present value of the face amount is the obtained by multiplying the bond face value by the discounting factor determined using the rate of return and number of periods in the discounting formula.

As for determining the present value of the stream of interest payments, the difference is if the interest payment is made at the beginning of the period, when the formula for calculating an annuity due will be used, or at the end of the period, when the formula for calculating ordinary annuity will be used.

The addition of the two above therefore gives the basic proceeds from the sale of a bond issue.