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 determines the dollar amount of interest paid to bondholders?

The bond's yield to maturity

The bond's stated (coupon) rate

The bond's maturity date

The bond's market price

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Verified step by step guidance

Understand the concept of a bond's stated (coupon) rate: The coupon rate is the annual interest rate set by the issuer of the bond at the time of issuance. It determines the fixed dollar amount of interest paid to bondholders periodically, typically semi-annually or annually.

Recognize that the bond's yield to maturity (YTM) is different: YTM represents the total return expected on a bond if held until maturity, factoring in the bond's market price, coupon payments, and time to maturity. It does not directly determine the dollar amount of interest paid.

Understand the bond's maturity date: The maturity date is the date on which the bond issuer repays the principal amount to the bondholder. While it is important for the bond's lifecycle, it does not affect the periodic interest payments.

Clarify the bond's market price: The market price is the current trading price of the bond in the market. It fluctuates based on market conditions and investor demand but does not influence the fixed dollar amount of interest paid to bondholders.

Conclude that the bond's stated (coupon) rate is the correct determinant of the dollar amount of interest paid to bondholders. The coupon rate is applied to the bond's face value to calculate the periodic interest payments.