Bonds Flashcards
term bond
bond that will pay the entire principal upon maturity at the end of the term
serial bond
bond in which principal matures in installments
debenture bonds
unsecured bonds that are not supported by any collateral
stated, face, coupon, nominal rate
rate printed on the bond
carrying amount
net amount at which bond is being reported on the BS, face value + premium or - discount, and - any bond issuance costs. aka book value or reported amount
effective rate, yield rate, market interest rate
actual rate of interest the company is paying on the bond based on the issue price.
premium
effective rate of interest will be lower than the stated rate
discount
effective rate of interest will be higher than stated rate
Bond Issue Costs
Contra Liability
Discount Amortization
Face - Discount = Carrying Value * Effective Interest Rate= Interest Expense - cash payment = amortization of discount
