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 is used to compute the cash interest payments on a bond?

Stated (coupon) rate multiplied by the issue price of the bond

Market (effective) rate multiplied by the face value of the bond

Stated (coupon) rate multiplied by the face value of the bond

Market (effective) rate multiplied by the carrying value of the bond

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Verified step by step guidance

Understand the concept of bond interest payments: Bonds typically pay interest periodically, and the cash interest payment is determined by the stated (coupon) rate and the face value of the bond.

Identify the stated (coupon) rate: This is the interest rate explicitly mentioned in the bond agreement, which determines the periodic cash interest payments.

Recognize the face value of the bond: The face value is the principal amount of the bond that the issuer agrees to repay at maturity. It is used to calculate the cash interest payments.

Apply the formula for cash interest payments: Multiply the stated (coupon) rate by the face value of the bond. The formula can be expressed as:

Cash Interest Payment = Stated Rate \times Face Value

Clarify the distinction between stated (coupon) rate and market (effective) rate: The stated rate is used for cash interest payments, while the market rate is used for calculating interest expense and the carrying value of the bond.