Listed below are several terms and phrases associated with long-term debt. Pair each item from List A
Question:
List A List B 1. Effective rate times balance 2. Promises made to bondholders 3. Present value of interest plus present a. Straight-line method b. Discount c. Liquidation payments after other value of principal 4. Call feature claims satisfied d. Name of owner not registered e. Premium f. Checks are mailed directly g. No specific assets pledged h. Bond indenture i. Backed by a lien j. Interest expense k. May become stock I. Legal, accounting, printing m. Protection against falling rates n. Periodic cash payments o. Bond price 5. Debt issue costs 6. Market rate higher than stated rate 7. Coupon bonds 8. Convertible bonds 9. Market rate less than stated rate 10. Stated rate times face amount 11. Registered bonds 12. Debenture bond 13. Mortgage bond 14. Materiality concept 15. Subordinated debenture
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List A List B j 1 Effective rate times balance a Straightline method h 2 Promises ...View the full answer
Intermediate Accounting
ISBN: 9781259722660
9th Edition
Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas
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Bond valuation is the process of determining the worth of a bond. It is based on the present value of the bond\'s future cash flows, which include coupon payments and the return of the bond\'s face value (or \"principal\") at maturity. The discount rate used in the calculation is directly tied to prevailing interest rates, and a rise in interest rates will decrease the present value of the bond and thus lower its price. Conversely, a fall in interest rates will increase the present value of the bond and raise its price. Interest rates serve as a benchmark for determining the value of a bond, as they determine the discount rate used in the bond valuation calculation. The most commonly used measure of interest rates is the yield to maturity (YTM), which represents the internal rate of return of an investment in a bond if the investor holds the bond until maturity and receives all scheduled payments. Yield to maturity is a function of the coupon rate, the current market price of the bond, the face value of the bond, and the number of years remaining until maturity. By comparing the yield to maturity of a bond to prevailing market interest rates, an investor can assess the relative value of the bond.
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