Listed below are common terms associated with bonds:

a. Bond certificate j. Coupon bonds

b. Bond issue k. Callable bonds

c. Bond indenture l. Convertible bonds

d. Unsecured bonds m. Face interest rate

e. Debenture bonds n. Market interest rate

f. Secured bonds o. Effective interest rate g. Term bonds p. Bond premium h. Serial bonds q. Bond discount i. Registered bonds Required 1. For each of the following statements, identify the category above with which it is associated. (If two statements apply, choose the category with which it is most closely associated.)

1. Occurs when bonds are sold at more than face value 2. Rate of interest that will vary depending on economic conditions 3. Bonds that may be exchanged for common stock 4. Bonds that are not registered 5. A bond issue in which all bonds are due on the same date 6. Occurs when bonds are sold at less than face value 7. Rate of interest that will be paid regardless of market conditions 8. Bonds that may be retired at management’s option 9. A document that is evidence of a company’s debt 10. Same as market rate of interest 11. Bonds for which the company knows who owns them 12. A bond issue for which bonds are due at different dates 13. The total value of bonds issued at one time 14. Bonds whose payment involves a pledge of certain assets 15. Same as debenture bonds 16. Contains the terms of the bond issue 17. Bonds issued on the general credit of the company 2. User Insight: What effect will a decrease in interest rates below the face interest rate and before a bond is issued have on the cash received from the bond issue? What effect will the decrease have on interest expense?
What effect will the decrease have on the amount of cash paid for interest?
Bond Basics—Straight-line Method, Retirement, and Conversion