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How would you define the market rate for a bond?
The actual interest rate, however, determined at auction, is referred to as the market rate. The market rate may equal the stated rate, or it may be higher or lower.
What happens when issuing bonds payable when the market interest rate is less than the stated interest rate?
premium
What mechanism is used to adjust the stated interest rate to the market rate of interest?
The mechanism used to adjust the stated interest rate to the market rate of interest typically involves the use of a benchmark rate, such as the LIBOR or the federal funds rate, which reflects current market conditions. Lenders may employ an interest rate spread, where the stated rate is set above or below the benchmark to account for factors like credit risk and inflation expectations. Additionally, financial instruments like adjustable-rate mortgages (ARMs) adjust periodically based on changes in the benchmark rate, aligning the stated interest rate with prevailing market rates.
What occurs when a bonds stated interest rate is less than the market interest rate?
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
When a bonds stated interest rate is less than the market interest rate is the rate at a discount or premium?
When the coupon rate (the contractual periodical "interest" payments) are lower than the yield (the market required return) the bond will be in discount. This discount makes up for the low value of the coupons.
How would you define the market rate for a bond?
The actual interest rate, however, determined at auction, is referred to as the market rate. The market rate may equal the stated rate, or it may be higher or lower.
What happens when issuing bonds payable when the market interest rate is less than the stated interest rate?
premium
What occurs when a bond's stated interest rate is less than the market interest rate?
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
What occurs when a bonds stated interest rate is less than the market interest rate?
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
What occurs when a bond's stated interest rate is greater than the market interest rate?
The bond's price will be in premium, meaning exceed 100
When a bonds stated interest rate is less than the market interest rate is it at a discount or premium?
When a bond's stated interest rate is less than the market interest rate, it is sold at a discount. This is because investors are less willing to pay the full face value for a bond that offers lower returns compared to prevailing rates. As a result, the bond's price falls below its par value to make it more attractive to potential buyers.
When a bonds stated interest rate is less than the market interest rate is the rate at a discount or premium?
When the coupon rate (the contractual periodical "interest" payments) are lower than the yield (the market required return) the bond will be in discount. This discount makes up for the low value of the coupons.
What inventory method does Walt Disney use?
Carrying amounts of merchandise, materials, and supplies inventories are generally determined on a moving average cost basis and are stated at the lower cost of market.
Can interest be added to late rent if not stated in lease?
No interest should only be charged if you are in a mortgage.
How are the economic questions of what to produce and how to produce decided in a market economy such as the US?
All three of the basic economic questions, in a market economy is answered by the market: What to produce: This is determined by what is demanded and what can be supplied (with the resources) in an economy. How to produce: This is determined by the resource available although theoretically, it should produce at the bottom point in the average cost curve. To whom to produce: Although not stated in the question, this is still a fundamental question in an economy. In a market economy, this question is answered by the demand and supply: The good is produced for all those who is willing and able to buy that good at a given price (determined by the demand and supply.)
A borrower is often confrented with a stated interest rate and an effective interest rate What is the difference and which one should a financial manager recognize as the true cost of borrowing?
A stated interest rate is the rate that is available when you are applying. An effective interest rate is the rate that has been applied to the loan. The true cost of borrowing is the effective interest rate.
What is differnce between interest rate stated as per annum and just interest rate as a percentage?
An interest rate as a percentage is the one flat rate you must pay. Interest rate per annum is a compound interest, determined every year that the loan (or whatever) has not been paid back. Say, if you owed me $100 with a 1% per annum interest rate. You have to pay me back $101. If you have not repaid the loan, the next year you would have to pay me an extra 1% of $101, and so on.
