1. Under what conditions of bond issuance do a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise?
2. Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
1. Bonds are issued at a discount or a premium so that the company gains a competitive edge in the bond market and is able to attract buyers . In order to be able to achieve this the Bond discount and premium adjust the bond’s yield to the current market rate. In relation to companies the Discount on bonds payable arises in a situation when a bond's stated interest rate is less than the bond market's interest rate.
The amount of the discount is a interrelation or function of the two factors i.e
1) the number of years before the bonds mature, and
2) the difference in the bond's stated interest rate and the market's interest rate
Premium on bonds payable (or bond premium)arises when bonds payable are issued by the company for an amount which is higher or greater than their face value or maturity amount of the bonds. This is caused by the bonds having a stated interest rate that is higher than the market interest rate for similar bonds
1. Under what conditions of bond issuance do a discount on bonds payable arise? Under what...
Under what conditions of bond issuance does a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise?
Under what conditions of bond issuance does a discount on bonds payable arise? Under what conditions of bond issuance does a premium on bonds payable arise?
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
Distinguish the differences among the following interest rates for bonds payable: yield rate, nominal rate, stated rate, market rate, and effective rate. Please give an example of each rate applied to actual practice.
.1. Ten-year bonds payable with face value of $87,000 and stated interest rate of 12%, paid semiannually. The market rate of interest is 12% at issuance. The present value of the bonds at issuance is $87,000 2. Same bonds payable as in assumption 1, but the market interest rate is 16%. The present value of the bonds at issuance is $69,955. 3. Same bonds payable as in assumption 1, but the market interest rate is 10%. The present value of the bonds...