Chapter10 - Topics on Bonds Chapter 10 Reporting and...

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1 1 Chapter 10 Reporting and Interpreting Bonds Acct 2301 Fall 09 2 Topics on Bonds Terminology of bonds coupon rate vs. market rate face value vs. carrying amount (i.e. book value) Proceeds from bonds (or selling/issuing price) Bonds issued at par, premium, and discount Amortization of bond premium (discount) 3 Corporate Bond Debt instruments sold to the public An alternative to raise capital Corporate bonds are publicly traded at bond market 4 Stated on Bond Maturity date Face value Amount of cash that bondholders will receive at maturity date Also called bond principal, par value, face amount Interest rate Is the stated interest rate or coupon rate NOT the market rate Interest pay date: annually or semi-annually, or monthly
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2 5 A share of bond $1,000 Matures Dec 31, 2019 Interest rate: 5% Interest pay date: June 30 and Dec 31 Harrah’s Inc. 6 Bond holders are entitled to Principal payment A lump sum payment at maturity date Face value of the bond Periodic interest payment A series of periodic cash payment = face value x stated interest rate 7 Proceeds of Bond Amount of cash that issuing company receives from the sale of bonds Also called the selling price or the issuing price of bonds Not always equal the face value of bonds 8 How is the selling price of bonds determined
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This note was uploaded on 02/10/2012 for the course ACCT 2301 taught by Professor Li during the Fall '09 term at University of Central Florida.

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Chapter10 - Topics on Bonds Chapter 10 Reporting and...

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