CMA Study Group

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  • 1.  Please Help 1 quick question

    Posted 09-24-2017 01:55 AM
    The best advantage of a zero-coupon bond to
    the issuer is that the
    A. Bond requires a low issuance cost.
    B. Bond requires no interest income calculation to
    the holder or issuer until maturity.
    C. Interest can be amortized annually by the
    APR method and need not be shown as an
    interest expense to the issuer.
    D. Interest can be amortized annually on a
    straight-line basis but is a noncash outlay

    The answer is d but i am not bale to understand why 

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    Srikanth Ganesh Babu
    GURGAON
    India
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  • 2.  RE: Please Help 1 quick question

    Posted 09-27-2017 04:00 AM


    Hello,

    Zero-coupon bonds do not pay periodic interest. The bonds are sold at a discount from their face value, and the investors do not receive interest until the bonds mature. The issuer does not have to make annual cash outlays for interest. However, the discount must be amortized annually and reported as interest expense.

    Hope this clarifies.

    Thanks 


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    Safa Firfire
    Kuwait
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  • 3.  RE: Please Help 1 quick question

    Posted 10-01-2017 02:45 PM
    Thank you so much 
    I really appreciate your efforts.


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    Srikanth Ganesh Babu
    GURGAON
    India
    ------------------------------