Question

Vodafone Group Plc reports the following information among its bonds payable as of March 31, 2015

(pounds in millions).

Financial Long-Term Liabilities Measured at Amortized Cost
£ millions	Nominal (par) Value	Carrying Value	Fair Value
4.625% (US dollar 500 million) bond due July 2018	£337	£375	£367

a. What is the par value of the 4.625% bond issuance? What is its book (carrying) value?

b. Was the 4.625% bond sold at a discount or a premium? Explain.

Short answer

(a) Par value equals £337 Million, and carrying value equals £375 Million.

(b) Bond are sold at premium

Step-by-step solution

(a) Par value and carrying value

Par value refers to the value of bond that will be paid at maturity to the bondholder. Carrying value is the book value of bonds.

(b) Issuance of bond

Bond are sold at premium, as bonds carrying value is more than Par Value.