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    Why do companies issue bonds and what is the determining factor for what it is sold for?

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    Why do companies issue bonds? Would you rather buy a bond at a discount or a premium rate? Why? What is the determining factor of whether a bond is sold at a discount, face value, or premium? What is the straight-line method of amortizing discount and premium on bonds payable? Provide an explanation of the process.

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    Why do companies issue bonds?

    Companies normally issue bonds instead of issuing stock. It could have to do with dilution of ownership interest, or control issues of majority stockholders. Bonds are more desirable to investors because they pay interest, are safer, and are preferred creditors in liquidation.

    Would you rather buy a bond at a discount or a premium rate? Why? ...

    Solution Summary

    This solution explains why companies issue bonds, whether it is better to buy a bond at a discount or a premium rate and why that is the case, the determining factor of a bond's price (i.e. a discount, face value, or premium rate), and an explanation of the process of the straight-line method of amortizing discount and premium on bonds payable.

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