Final answer:
The cash received upon issuance of an interest-bearing note is usually equal to the note's face value. Correct answer is option c.
Step-by-step explanation:
The relationship between the amount of cash received upon issuance of an interest-bearing note and the note's face value is generally described by option C: The cash received is equal to the note's face value. When a bond is issued, the face value—the principal amount of the bond—is what the issuer agrees to pay back to the investor at maturity. The cash received at the time of issuance is usually equivalent to this face value, unless the prevailing market interest rates differ from the bond's coupon rate.
However, it's worth noting that after the initial issuance, the selling price of a bond in the secondary market may be above or below the face value depending on changes in interest rates. If market interest rates fall, the bond's price may rise above its face value as investors are willing to pay a premium for the higher coupon rate relative to the market.
Conversely, if market interest rates rise, the bond might sell for less than its face value due to its lower comparative coupon rate.
The present value calculation takes into account the bond's face value, coupon rate, maturity date, and prevailing market interest rates to determine how much a bond is worth in today's dollars—this may not be the same as the bond's face value.