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long term debts - The following types of long-term debt are...

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The following types of long-term debt are covered here: 1. Term loans 2. Bonds 3. Debentures 4. Mortgage bonds 5. Convertible bonds Term Loans. This is the form of long-term debt most frequently used by businesses. It is a loan from a bank to acompany that is used to finance expansion efforts. It has afixed maturity date, frequently five to seven years from the date ofthe loan. The company will repay the loan in monthly installments ofprincipal and interest. Spreading the payments of the principalover the life of the loan is called loan amortization. The monthly payments of principal and interest are called debt service. The amortization of the principal can take place over a period that islonger than the loan period. With this arrangement, theremaining principal is due at the end of the loan period. That endingbalance is called a balloon payment. Bonds. A bond has many characteristics similar to those of a term loan. The differences are: 1. A bond is a negotiable instrument that can bebought and sold like common stock. 2. A bond is usually sold to the public through apublic offering registered with the Securities and ExchangeCommission.
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