Bonds Flashcards

1
Q

Who issues bonds?

A

Governmental/public entities issue bonds as external finance source

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2
Q

how are bonds valued?

A

Interest rate (coupon rate) = fixed rate based on nominal (face) value

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3
Q

Do bonds have an expiry date?

A

Predetermined expiry date on which the capital (nominal value) must be repaid

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4
Q

Issuer of bond?

A

Issues bonds to holder in return for consideration

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5
Q

Holder of bond?

A

Acquires / purchases bonds from Issuer

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6
Q

For issuers, you will

A
Dr Bank
Cr liability 
Because: one pays interest @ coupon% (obligation)
Pay capital @ maturity date (obligation)
(OBLIGATION)
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7
Q

For holders, you will

A
Dr Financial Asset 
Cr. Bank 
Because: You 
Receives interest @ coupon%
Receives capital @ maturity date
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