Question

interest is always calculated on the __value of the security
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Answer 1

Explanation:

Any interest on investment is calculated on its face value. Explanation: The interest rate of security plays a vital role in determining...

Answer 2

Answer:

Interest is always calculated on the face value of the security.

Explanation:

All investment interest is calculated from its nominal value or face value. A security's interest rate plays an important role in determining whether a security is sold at par, at a premium, or at a discount. For example, if a company issues 5-year bonds for $500,000, with interest paid annually, and the market interest rate for similar bonds is 7%, compared to the market interest rate and the coupon rate, the similar bonds are paying high. -coupon market, while the company in question pays less. To attract investors, the bond is sold at a price lower than the face value. However, interest is paid on the face value.

In this example, interest expense = face value of the bond * interest rate, which means $500,000 * 5% = $25,000.

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