XACC291 Week 2 discussion question

User Generated


Business Finance

Question Description

For a little more of a spark consider the following after reading Chapter 10 of our text:  

Why do companies issue bonds? Would you rather buy a bond at a discount or a premium rate? Why?.

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Explanation & Answer

Companies issue bonds to raise capital.  There are many motivations to raise capital, but here are a few: desire to acquire another company, desire to purchase some new property/plant/equipment, desire to perform some research and development, desire to recapitalize the business to pay the owners a dividend, etc....

I would rather buy a bond at a discount because that means I'd be buying it for less than face value (thus, when it expired I'd receive more money back than I paid of the bond in the first place).

Nyrk M (997)
University of Maryland

Really helpful material, saved me a great deal of time.