chap10 - CHAPTER 10 Reporting and Interpreting Bonds Acct...

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1 Acct 284 Chap. 10 CHAPTER 10 Reporting and Interpreting Bonds
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2 Acct 284 Chap. 10 What Do You Need to Know About Bonds? Vocabulary Why issue them? How much do they sell for? How do we recognize interest on them?
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3 Acct 284 Chap. 10 Important Terms * Principal (Face Value, Maturity Value) * Stated Interest Rate (Coupon Rate) * Effective Interest Rate (Yield, Market Rate) * Bond Proceeds * Callable Bonds, Debentures, Convertible Bonds * Discount and Premium * Moody’s & Standard and Poor’s
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4 Acct 284 Chap. 10 Why Sell Bonds? Can raise a large amount of cash directly from creditors. Advantages to Company: * Ownership is not diluted * Cash payments are known and fixed * Interest is tax deductible (dividends aren’t) * Financial Leverage Advantages to Buyers: * Higher return than savings * Can sell the bond to another investor to get cash out before maturity
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5 Acct 284 Chap. 10 Why not Issue Bonds? * Company:
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This note was uploaded on 09/23/2009 for the course ACCT 284 taught by Professor Clem during the Spring '08 term at Iowa State.

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chap10 - CHAPTER 10 Reporting and Interpreting Bonds Acct...

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