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-BARSIC- [3]
3 years ago
9

What is Market Value of Debt?The Market Value of Debt refers to the market price investors would be willing to buy a company’s d

ebt , which differs from the book value on the balance sheet. A company’s debt doesn’t always come in the form of publicly traded bonds, which have a specified market value. Instead, many companies own debt that can be classified as non-traded, such as bank loans.
Business
1 answer:
garik1379 [7]3 years ago
5 0

Answer:

The entire definition given in the question is true. A company's debt can be divided into two parts:

  1. one part that has been obtained through bank loans and therefore doesn't have a specific market value since it cannot be traded. Banks can and do trade their clients' debts, but a client cannot trade their own debt with a bank. Banks consider debts an asset, not a liability.
  2. if a company issued bonds or preferred stock, the market value of their debt will include the coupons and dividends distributed, and the market value at which the securities are traded in the market. Many times bonds are traded with a discount or premium which reduces or increases the market value of the debt. Also, the value of preferred stock varies and that also affects the market value of debt.

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