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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which one of the following is the price that an investor pays to purchase an outstanding bond?

Market price

Face value

Maturity value

Coupon rate

Previous problemNext problem

Verified step by step guidance

Understand the concept of a bond: A bond is a fixed-income instrument that represents a loan made by an investor to a borrower. Bonds typically have a face value (the amount the issuer agrees to repay at maturity), a coupon rate (the interest rate paid periodically), and a maturity value (the amount paid at the end of the bond's term).

Recognize the term 'market price': The market price of a bond is the price at which the bond is currently trading in the market. It is determined by supply and demand and may differ from the bond's face value or maturity value.

Differentiate between the options: The face value is the nominal value of the bond, typically $1,000 for corporate bonds. The maturity value is the amount the issuer repays at the end of the bond's term, which is usually equal to the face value. The coupon rate is the interest rate paid periodically, expressed as a percentage of the face value.

Identify the correct answer: The price an investor pays to purchase an outstanding bond is the market price, as it reflects the current value of the bond based on market conditions.

Conclude the reasoning: The market price can fluctuate above or below the face value depending on factors such as interest rates, credit risk, and time to maturity. Investors use the market price to determine the cost of acquiring the bond.