Is interest paid on deep disc bonds?and as it cannot be issued at a discount to nominal vlues,is it more than $100?
Yes, but very low interest.
Bonds can be issued at a discount to nominal value (it is shares that cannot be).
So that is why the interest is very low. If you issued $100 bonds at only $60 (a big discount) but repayable at the full $100, then there is such a big gain on repayment that the investor will accept a very low rate of interest.
But in the bpp kit it says bonds cannot be issued at a discount due to which I was confused
Thats not true – it is shares that cannot be issued at a discount.
(Sorry – I believe you! It is what you say that BPP say is not true )
You must be logged in to reply to this topic.