Accounting 2 chapter 14

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Bonds are short-term debt issued to multiple lenders called bondholders, usually in increments for $1,000 per bond

FALSE

Which of the following is the amount the borrower must pay back to the bondholders at maturity?

Principal amount

The date on which the principal amount is repaid to the bondholder is known as

Maturity date

The reason investors buy bonds is to

Earn interest

Term bonds all mature at the same specified time

TRUE

The amount of cash interest the borrower pays each year is based on the

Stated interest rate

Which of the following describes a serial bond?

A bond that matures in installments at regular intervals

Which of the following describes a secured bond?

A bond that is back by issuers specific assets

Which of the following describes a debenture?

A bond that is not backed by specific assets

Which of the following statements id true of a bond that is issued at a discount?

The bond will be issued for an amount less than face value

Which of the following statements is true of a bond that is issued at a premium ?

The bond will be issued at an amount about face value

When a bond is issued at a price higher than the face value, the difference is known as

Premium

Which of the following concepts represents time value of money?

The concept that money earns interest over time

A bond is issued at premium

When a bonds stated interest rate is higher than the market interest rate

A bond is issued at discount when a bonds stated interest rate is

Less than market interest rate

The interest rate that determines the amount of cash interest the borrower pays and the investor receives each year is called

Stated interest rate

The interest rate on which cash payments to bondholders are based is this

Stated rate

Which of the following statements is true if a bond is issued for an amount equal to its face value?

The bonds stated interest rate is the same as the prevailing market interest rate at time of sale

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