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 one of the following bond values will change when interest rates change?

Coupon payment of the bond

Maturity value of the bond

Market value of the bond

Face value of the bond

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Verified step by step guidance

Understand the concept of bond valuation: Bonds are financial instruments that pay periodic interest (coupon payments) and return the principal (face value) at maturity. Their market value fluctuates based on interest rate changes.

Clarify the fixed components of a bond: The coupon payment, maturity value, and face value of a bond are predetermined and do not change due to interest rate fluctuations. These are contractual obligations of the bond issuer.

Explain the relationship between interest rates and market value: When interest rates rise, the market value of existing bonds typically decreases because new bonds are issued with higher coupon rates, making older bonds less attractive. Conversely, when interest rates fall, the market value of existing bonds increases.

Highlight the role of the market value: The market value of a bond is the price at which it can be bought or sold in the secondary market. This value is influenced by prevailing interest rates, investor demand, and other market conditions.

Conclude with the correct answer: The market value of the bond is the component that changes when interest rates change, as it reflects the bond's current worth in the market.