Question

Interest on debt is calculated on
OA) Face value
B) Market value
C) book value
D) intrinsic value​

Answer 1

intrinsic valu........is a answer.............

Answer 2

D) Intrinsic value

Explanation:

• Face value: It is the value which represents the nominal value of the company. For stocks  it is generally at 10 and for bonds100. This value usually remains the same for stocks and is of importance when a company decides to do most of the corporate actions.
• Book value: The book value of a company is the net value which is present in the books. This value is determined by selling off all the assets and paying off the liabilities and dividing the left amount by the number of shares.
• Market value: It is the value at which the stocks trade takes place in the stock exchanges. The definition is also equally valid for bonds at the bond market. This is commonly known as Current Market Price.
• Intrinsic value: It is the actual value that the investor decides to pay or get for the investments. This the value which is commonly known as the discounted value of the future benefits.

“It is the discounted value of the cash that can be taken out of a business during its remaining life.”

Hence, Interest on debt is calculated on intrinsic value.

Learn more about face value, market value and intrinsic value:

What is face value and book value?

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Difference between intrinsic value, face value, and book value of share

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