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29 Cards in this Set
- Front
- Back
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The amount the borrower must pay back to the bondholders on the maturity date.
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Principle Amount
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The Date on which the borrower must pay the principal amount to the bondholders. The Date the principal is paid off.
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Maturity date
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The Annual rate of interest that the borrower pays the bondholders. The interest rate that cash payments to bondholders are based on.
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Stated interest rate
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Also called Maturity value, Face Value or par value
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Principle amount
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Also called face rate, coupon rate or nominal rate
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Stated interest rate
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These bonds all mature at the same specified time.
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Term bonds
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These bonds mature in installments at regular intervals. They may mature in annual installments over a five-year period.
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Serial Bonds
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These bonds give the bondholder the right to take specified assets of the issuer if the issuer fails to pay principal or interest. Like a mortgage on a house.
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Secured Bonds
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These bonds are unsecured bonds that are not backed by assets They are backed only by the goodwill of the bond issuer.
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Debentures
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A bond can be issued at any price agreed upon by the issuer and the bondholders. Name the three Bond prices.
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Face (or par or maturity) value, Discount, or Premium
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A $1,000 bond issued for $1,000. It is issued at face value and has no discount or premium.
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Face Value Bond Price
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A price that is below Maturity (Face) value. A $1,000 bond issued at $960.
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Discount or Bond discount. The discount is $40
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A price above maturity (Face) value. A $1,000 bond issued for $1,015.
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Premium bond the premium is $15
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As a bond approaches maturity, its market price moves toward ________________ value
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maturity Value
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After a bond is issued, where can investors buy and sell the bond?
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The Bond Market
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A $1,000 bond quoted at 100 is bought or sold for ________
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100% of maturity value, ($1,000 x 1.00)
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The ___________ price of a bond determines the amount of _________ the company receives when it issues the bond.
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issue price
Cash |
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The company must pay the bond's _____________ value in order to retire the bond.
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Maturity
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Money earns income over time. A fact know as the _____________
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Time value of Money
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The amount that a person would invest at the present time is called the _______________ of the bond.
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present value
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The present value is the bond's ____________ price.
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market
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Bonds are sold at their ________________ price.
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Market
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The market price of a bond is the _____________ ____________ of the interest payments the bondholder will receive while holding the bond plus the bond ___________ paid at the end of the bond's life.
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present value
principal |
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What are the two interest rates that work together to set the price of a bond?
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The Stated interest rate and the Market interest rate
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What does the stated interest rate on a bond determine?
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It determines the amount of cash interest the borrower pays each year. This rate does not change year to year
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The rate that investors demand to earn for loaning their money. This rate can also vary constantly.
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Market Interest Rate
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What is the basic journal entry to record the issuance of bonds payable?
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credits bonds payable and debits cash
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A company may issue bonds at what three values or prices?
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at maturity (face or par) value
at a discount at a premium |
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Journalize the following: a bond is issued at maturity value of $100,000 of 9% bans payable that mature in five years. Date of issue is January 1, 2013.
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