Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › a quick question – thanks in advance
- This topic has 4 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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- December 6, 2015 at 11:17 am #288174
Which debt that the market value is all the expected interest discounted at the investor’s required rate of return?
A. Redeemable
B. IrredeemableWhich debt that the market value is the interest and capital discounted at the investor’s required rate of return?
A. Redeemable
B. IrredeemableDecember 6, 2015 at 3:01 pm #288224I don’t know where you found these questions (and why there is no answer in the same book!!) but both (as you have typed them are very poor).
In both cases the market value is the present value of expected future receipts.
With irredeemable debt, the only future receipts are the interest.
With redeemable debt, the future expected receipts are the interest and the repayment on redemption.
You really should watch our free lectures on the valuation of securities (in F9 as well because this is very basic revision of F9).
December 6, 2015 at 3:17 pm #288230John
Thanks so much. I typed them as per they appeared in the question book and the answers were “Redeemable” for the first and “Irredeemable” for the second!! For a short while I thought my basic principles had disappeared 🙂 :). Panic buttons were being pressed all over my study table. 🙂 🙂
Regards
LiaamDecember 6, 2015 at 3:19 pm #288231Not Liaam, Liam 🙂
December 6, 2015 at 3:29 pm #288238You are welcome 🙂
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