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    Bond Principal Payment: Face Interest Rate Nominal Interest Rate Coupon Interest Rate Contractual Interest Rate

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    Kylie Tarnate
    The document defines several terms that all refer to a bond's stated interest rate, including face interest rate, nominal interest rate, coupon interest rate, and contractual interest rate. Throughout the explanation, the term stated interest rate or stated rate will be used. A bond's principal payment refers to the amount that will be paid back at maturity, also known as the face value, par or par value, maturity value or maturity amount, and stated value. The document provides a timeline showing a bond that pays 9% interest semiannually and will repay the $100,000 principal at maturity in 5 years.

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    Bond Principal Payment: Face Interest Rate Nominal Interest Rate Coupon Interest Rate Contractual Interest Rate

    Uploaded by

    Kylie Tarnate
    51 views2 pages
    The document defines several terms that all refer to a bond's stated interest rate, including face interest rate, nominal interest rate, coupon interest rate, and contractual interest rate. Throughout the explanation, the term stated interest rate or stated rate will be used. A bond's principal payment refers to the amount that will be paid back at maturity, also known as the face value, par or par value, maturity value or maturity amount, and stated value. The document provides a timeline showing a bond that pays 9% interest semiannually and will repay the $100,000 principal at maturity in 5 years.

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    Bonds

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    Bonds

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    The document defines several terms that all refer to a bond's stated interest rate, including face interest rate, nominal interest rate, coupon interest rate, and contractual interest rate. Throughout the explanation, the term stated interest rate or stated rate will be used. A bond's principal payment refers to the amount that will be paid back at maturity, also known as the face value, par or par value, maturity value or maturity amount, and stated value. The document provides a timeline showing a bond that pays 9% interest semiannually and will repay the $100,000 principal at maturity in 5 years.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    51 views2 pages

    Bond Principal Payment: Face Interest Rate Nominal Interest Rate Coupon Interest Rate Contractual Interest Rate

    Uploaded by

    Kylie Tarnate
    The document defines several terms that all refer to a bond's stated interest rate, including face interest rate, nominal interest rate, coupon interest rate, and contractual interest rate. Throughout the explanation, the term stated interest rate or stated rate will be used. A bond's principal payment refers to the amount that will be paid back at maturity, also known as the face value, par or par value, maturity value or maturity amount, and stated value. The document provides a timeline showing a bond that pays 9% interest semiannually and will repay the $100,000 principal at maturity in 5 years.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    he following terms mean the same as a bond's stated interest rate:

    face interest rate


    nominal interest rate
    coupon interest rate
    contractual interest rate
    Throughout our explanation of bonds payable we will use the term stated interest rate or
    stated rate. Usually a bond's stated interest rate is fixed or locked-in for the life of the
    bond.

    Bond Principal Payment


    A bond's principal payment is the dollar amount that appears on the face of a bond. This
    is the amount that the issuing corporation must pay to the bondholders on the date that
    a bond matures or comes due. Here are some names that refer to a bond's principal
    amount:
    face value
    par or par value
    maturity value or maturity amount
    stated value
    Throughout our explanation we will use these terms interchangeably. In addition, we
    assume that the bond's principal amount will be due on a single date.

    Timeline for Interest and Principal Payments


    It is helpful to prepare a timeline to visualize the cash payments that a corporation
    promises to pay its bondholders. The following timeline presents the cash payments of
    interest and principal for a 9% $100,000 bond maturing in 5 years:

    As the timeline indicates, the corporation will pay its bondholders 10 semiannual interest
    payments of $4,500 ($100,000 x 9% x 6/12 of a year). Each of the interest payments
    occurs at the end of each of the 10 six-month time periods. When the bond matures at

    the end of the 10th six-month period, the corporation must make the $100,000 principal
    payment to its bondholders.
    http://www.accountingcoach.com/bonds-payable/explanation

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