A2 - RE Premium Bonds When bonds sell at a premium this...

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AC101- Accounting Principles II BTN 14-4 Your business associate mentions that she is considering investing in corporate bonds currently selling at a premium. She says that since the bonds are selling at a premium, they are highly valued and her investment will yield more than the going rate of return for the risk involved. Reply with a memorandum to confirm or correct your associate’s interpretation of premium bonds. Memo TO: Business Associate FROM: DATE: July 17, 2007
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Unformatted text preview: RE: Premium Bonds When bonds sell at a premium this means that the bonds are selling at a price higher than par value. What a company receives for the bond would be the premium value, and the amount that is paid back would be the par value. This means that the company will receive more money for the bond, and pay back less then they received. You are correct in your interpretations of premium bonds and thank you for your input. Sincerely,...
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This note was uploaded on 10/12/2008 for the course AC 102 taught by Professor Min during the Spring '08 term at Mt. Aloysius.

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