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Flashcards in F11 Bonds Deck (17):
1

Term Bond

Bond that will pay the entire principal upon maturity at the END of the term

2

Serial Bond

The principal matures in installments
(like when you eat cereal, every morning)

3

Debenture bonds

unsecured bonds that are not supported by collateral

4

Rate printed on the bond. What's called & represent?

Stated, face, coupon, nominal rate = amount Investor RECEIVES with each payment

5

Actual rate of interest a company is paying

Effective Rate, Market Interest Rate or Yield = actual rate paid

6

(Face Value + Premium) or (Face Value - Discount)

Carrying Value = net amount on BS
Also called Book Value or Reported Amount

7

When the effective rate is Lower than stated rate

Premium

8

When the effective rate is Higher than the stated rate

Discount

9

Restrictions that borrowers agree to

Covenants

10

When issuer has right to redeem bond prior to maturity

Callable bond

11

When bond can be converted into common stock of debtor at the bondholders option

Convertible bond

12

Issuance of Bonds JEs

DR Cash
DR Discount or CR Premium
CR Bonds Payable

13

Amortization of Bond JEs

DR Interest Expense
DR Premium or CR Discount
CR Cash

14

Amount you need to invest today for "x" years at "i" interest rate to get $1 back in future

PV of Amount (Lump Sum)

15

repeated cash flows on a systematic basis, paid at the End of each period

PV of Ordinary Annuity AKA Annuity in Arrears
This is common for bond interest payments

16

repeated cash flows on a systematic basis, paid at the Beginning of each period

PV of Annuity Due AKA Annuity in Advance
Common for Rent payments

17

Future Values is known as

Compounded Interest - 1 divided by a PV factor * investment