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| Chapter 15 |
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| annuity |
A series of equal cash flows at fixed intervals. (655, 1147) |
| bond |
A form of an interest-bearing note used by corporations to borrow on a long-term basis. (650) |
| bond indenture |
The contract between a corporation issuing bonds and the bondholders. (652) |
| carrying amount |
The balance of the bonds payable account (face amount of the bonds) less any unamortized discount or plus any unamortized premium. (662) |
| contract rate |
The periodic interest to be paid on the bonds that is identified in the bond indenture; expressed as a percentage of the face amount of the bond. (653) |
| discount |
The interest deducted from the maturity value of a note or the excess of the face amount of bonds over their issue price. (481, 574, 653) |
| effective interest rate method |
The method of amortizing discounts and premiums that provides for a constant rate of interest on the carrying amount of the bonds at the beginning of each period; often called simply the “interest method.” (659) |
| effective rate of interest |
The market rate of interest at the time bonds are issued. (653) |
| future value |
The estimated worth in the future of an amount of cash on hand today invested at a fixed rate of interest. (653) |
| held-to-maturity securities |
Investments in bonds or other debt securities that management intends to hold to their maturity. (666) |
| number of times interest charges are earned |
A ratio that measures creditor margin of safety for interest payments, calculated as income before interest and taxes divided by interest expense. (668, 754) |
| premium |
The excess of the issue price of a stock over its par value or the excess of the issue price of bonds over their face amount. (574, 653) |
| present value |
The estimated worth today of an amount of cash to be received (or paid) in the future. (653) |
| present value of an annuity |
The sum of the present values of a series of equal cash flows to be received at fixed intervals. (655, 1147) |
| sinking fund |
A fund in which cash or assets are set aside for the purpose of paying the face amount of the bonds at maturity. (662) |
