Question

Definition of Contract or Face rate of interest vs. Definition of Market or Effective Rate of Interest?

When do bonds sell at Face Value, a Premium and a Discount?

Definition of Net Realizable Value?

Answer 1

Face Interest rate means the actual rate of interest that the company is paying to the bond holder, whereas the effective rate of interest means the actual cost of interest that the company actually bears.

bonds sell at par when the investor's expected rate of return is equal to the rate of interest provided by the company.At premium when the investor's expected rate of return(interest) is less than the rate off interest provided by the company.they sell at discount when the rate of interest provided by the co. is less than the investors expected rate of interest.

Net Realizable Value means the net amount recievable from the sale of asset or anything else after deducting therefrom all the expenses incurred on its sale(ex-Commision,Brokerage,further selling expenses,etc)