Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Bond premium and discount
- This topic has 5 replies, 2 voices, and was last updated 5 years ago by John Moffat.
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- October 24, 2018 at 2:43 pm #479652
dear Sir
if a country has a high risk of inflation do we want a premium (more to pay at the end) or discount(less to pay at the end) on a bond if we are issuing the bond?
October 25, 2018 at 8:54 am #479738It depends whether the investor wants high income or high capital growth.
If they want capital growth then they will prefer a premium on redemption.
October 27, 2018 at 4:21 pm #479962Thank you…and for the issuer in a high inflation environment??
October 28, 2018 at 10:19 am #480026They will want to pay a premium on redemption. It will mean they can pay lower interest during the life of the bond, and given their earnings will have inflated it will be easier for them to pay the premium at the end.
October 28, 2018 at 1:43 pm #480055Great, thank you very much
October 28, 2018 at 3:26 pm #480065You are welcome 🙂
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