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CHAPTER 10 - Coggle Diagram
CHAPTER 10
BOND
a liability issued to the investing public so that a corporate or government entity can raise capital to finance operations or expansion
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a company might choose to issue bonds instead of stock to avoid diluting shareholders interest, to benefit from the tax deductions associated with paying interest and to potentially increase the return to shareholders
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BOND COUPON RATE
the interest rate specified on a bond and is the rate used to compute the bonds periodic cash interest payment
the market rate of interest is the rate of return investors demand for a companys bonds on the date the bonds are issued
any difference between a bonds coupon rate and the market rate of interest on the date of issuance creates a bond discount or a bond premium depending on whether the coupon rate is lower or higher than the market rate
MARKET INTEREST RATE
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the difference between a bonds coupon rate and the market rate of interest determines whether a bond is issued at a discount or a premium
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DEBT TO EQUITY RATIO
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describes the relationship between the amount of capital provided my owners and the amount of capital provided by creditors
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BOND COVENANTS
designed to protect bond investors by limiting what a company can do while the bond is still outstanding
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