Business Administration 2257 Chapter Notes - Chapter 10: Effective Interest Rate, Book Value
25 Apr 2019
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Bmos 2257: chapter 10- reporting and analyzing liabilities. Bond: a promise to repay a specified amount of money (a face value) at a fixed future date in addition to periodic interest payments. Coupon interest rate: determines the amount of interest to pay a bondholder. Normally paid semi annually, although some bonds pay interest monthly or quarterly. Bonds can be traded on public exchanged in the same way that shares are. They are quotes as a percentage of the face value of the bond. Market interest rate: the rate that investors demand to earn for lending their money. The pv of a bond is what it sells for on the marketplace. It depends on 3 factors: the dollar amounts to be received, the length of time until the amounts are received, the market interest rate. Two types of cash inflows : the face amount to be repaid at maturity, the interest payments.
