Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

Financial Accounting

11. Long Term Liabilities

Introduction to Bonds and Bond Characteristics

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Multiple Choice

Which of the following best defines a bond's current yield?

The total amount paid to the bondholder at maturity.

The bond's coupon rate divided by its face value.

The annual interest payment divided by the bond's current market price.

The difference between the bond's purchase price and its face value.

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Verified step by step guidance

Understand the concept of a bond's current yield: It represents the annual return on the bond based on its current market price, not its face value.

Identify the formula for calculating the current yield: Current Yield = Annual Interest Payment / Current Market Price.

Clarify the components of the formula: The annual interest payment is the fixed amount paid to the bondholder each year, typically determined by the bond's coupon rate. The current market price is the price at which the bond is currently trading in the market.

Compare the given options to the definition and formula: The correct answer aligns with the formula, which is 'The annual interest payment divided by the bond's current market price.'

Reinforce the distinction between current yield and other bond-related terms: Current yield focuses on the relationship between annual interest and market price, while terms like face value, coupon rate, and maturity value pertain to other aspects of bond valuation.