Bonds are certificates that promise to pay the holder a specified sum of money (face value or par value) plus interest at a stated rate. This document discusses key bond terms like redemption value, bond rate, and yield rate. It provides an example of how to calculate current yield based on annual interest and price of the bond. Finally, it poses a problem asking the value of a $1000, 6% bond with semi-annual coupons that will be redeemed at par in 15 years.

1. Chapter 15: Bonds Payable
P.H.

2. Bonds
 A certificate promising to pay its holder a
specified sum of mone plus interest at a stated
rate

3. Terms
 Face Value or Par Value
– borrowed principal mentioned on bond
 Redemption Value
– amount on redemption date
 Bond Rate
– stated rate at w/c bond promises to pay
interest on its FV
 Yield rate
– profit realized by purchaser of bond

4. Current yield
CY = Interest per Annum / Price of Bond
1)Bond : 10,000 2) for 9,700 ?
Interest : 10% 3) for 10450 ?

5. General Method
Value of Bond =
PV= FV (1+i)-n + i
^
^

6. Problem
A 1000 , 6% bond with semi-annual coupons will
be redeemed at par at the end of 15 years?

7. Problem
A 1000 , 6% bond with semi-annual coupons will
be redeemed at par at the end of 15 years?