Type of Bonds
are similar to Treasury bonds, except they are issued by state and local governments.
Issue bond at 96.
96% of face value
Process to reduce premium or discount.
Amortization
Amount to pay back at end of bond.
Maturity Value
discounted securities issued by the U.S. government to finance its operations and programs.
Treasury Bills
are issued by the U.S. government, state governments, and local or municipal governments.
Government Bonds
Issue bond at 102
Price is 102% of face value
Value higher than check amount in case of discount.
Effective Interest
Used to determine interest payment.
Coupon or Face Rate
represent loans from one bank to another bank.
federal funds
Bond holder receives stock in exchange on redemption / retirement.
Convertible Bond
Receive less than face amount.
Discount
Value lower than check amount in case of premium.
Effective Interest
Used to determine interest expense.
Effective or Market Rate
is a type of promissory note, or “legal IOU,” issued by large, financially sound firms.
commercial paper
Issuing company has right to buy back bond.
Callable Bond
Receive more than face amount.
Premium
Apply to effective rate to obtain interest expense.
Book Value
Method applied to have equal amounts of expense.
Straight-line
consist of investment dollars that are pooled to purchase large amounts of short-term financial (money market) assets
are bonds that can be turned in to the firm prior to maturity in exchange for cash at the bondholder’s option on specific dates or if the firm takes some unusual action
Putable (retractable) bonds
Used to calculate a bond price.
PV of Annuity + Maturity Value
Apply coupon rate to obtain check amount.
Face / Maturity Amount
Reduces cash received from issuance of bond.
Debt Issue Costs
represents a savings time deposit at a bank or other financial intermediary.
certificate of deposit