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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. IrredeemableI 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).
John
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
Liaam
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