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 explains the current value of a bond?

The original issue price of the bond.

The face value of the bond as stated on the certificate.

The present value of all future cash flows (interest and principal) discounted at the market rate of interest.

The sum of all future interest payments to be received from the bond.

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Verified step by step guidance

Understand the concept of bond valuation: A bond's current value is determined by the present value of all future cash flows (interest and principal) that the bondholder will receive, discounted at the market rate of interest.

Identify the cash flows associated with the bond: These include periodic interest payments (coupon payments) and the principal repayment at maturity.

Apply the present value formula for each cash flow: The formula for present value is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value (cash flow), r is the market rate of interest, and n is the number of periods until the cash flow is received.

Calculate the present value of the interest payments: Sum the present values of all periodic coupon payments by applying the formula to each payment individually.

Calculate the present value of the principal repayment: Discount the face value of the bond (principal) to its present value using the same formula, and then add this to the total present value of the interest payments to determine the bond's current value.