Chapter 12

Question 1

Mortgages Payable

Answer 1

are long-term debts that are backed with a security interest in specific property

Question 2

Amortization schedule

Answer 2

details each loan payment’s allocation between principal and interest and the beginning and ending balances of the loan.

Question 3

bonds payable

Answer 3

are long-term debts issued to multiple lenders called bondholders,usually in increments of $1000 per bond

Question 4

face value

Answer 4

is the amount of a borrower must pay back to the bondholders on the maturity date

Question 5

maturity date

Answer 5

is the date on which the borrower must pay the principal amount to the bondholders

Question 6

state interest rate

Answer 6

is the interest rate that determines the amount of the cash interest the borrower pays and investor receives each year

Question 7

term bonds

Answer 7

are bonds that all mature at the same time

Question 8

serial bonds

Answer 8

are bonds that mature in installments at regular intervals

Question 9

secured bonds

Answer 9

are bonds that give bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest

Question 10

debentures

Answer 10

are unsecured bonds backed only by the creditworthiness of the bond issuer

Question 11

discount on bonds payable

Answer 11

occurs when the issue price is less than face value

Question 12

premium on bonds payable

Answer 12

which occurs when the issue price is above face value

Question 13

time value of money

Answer 13

is the recognition that money earns interest over time

Question 14

present value

Answer 14

is the amount a person would invest now to receive a greater amount in the future

Question 15

market interest rate

Answer 15

is the rate that investors demand to earn for loaning their money based current on market conditions and risk