notes and bonds Flashcards
1
Q
notes interest expense
A
interest expense (stated rate)
int payable(market value)
2
Q
bonds interest expense
A
cash (market)
disc bp
bp
int expense(market)
disc bp
cash(stated)
3
Q
book value method shows
market value method shows
A
no loss or gain
loss or gain
4
Q
concessions-debt restructure
type 1
type 2
A
type 1 (bad for creditor) sumbv new cf>bv of debt
5
Q
debt covenants are
A
clause to protect creditors. more risky the debt the more restrictive the covenant
6
Q
when bond pays higher rate than the market then it will sell for a
A
premium
