Bonds Flashcards
1
Q
Who issues bonds?
A
Governmental/public entities issue bonds as external finance source
2
Q
how are bonds valued?
A
Interest rate (coupon rate) = fixed rate based on nominal (face) value
3
Q
Do bonds have an expiry date?
A
Predetermined expiry date on which the capital (nominal value) must be repaid
4
Q
Issuer of bond?
A
Issues bonds to holder in return for consideration
5
Q
Holder of bond?
A
Acquires / purchases bonds from Issuer
6
Q
For issuers, you will
A
Dr Bank Cr liability Because: one pays interest @ coupon% (obligation) Pay capital @ maturity date (obligation) (OBLIGATION)
7
Q
For holders, you will
A
Dr Financial Asset Cr. Bank Because: You Receives interest @ coupon% Receives capital @ maturity date
