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Chapter 10
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Gravity
Terms in this set (31)
long-term liabilities
debts or other obligations that will not be paid within one year
present value of $1
the value today of $1 to be received or paid at some future date, given a specified interest rate
compounding period
the period of time for which interest is computed
annuity
a series of equal amounts to be received or paid at the end of equal time intervals
present value of an annuity
the value today of a series of equally spaced, equal-amount payments to be made or received in the future given a specified interest rate
mortgage payable
a written promise to pay a stated amount of money at one or more specified future dates; certain assets, usually real estate, are pledged as collateral
mortgage amortization schedule
a schedule that shows the breakdown between interest and principal for each payment over the life of a mortgage
bond
a contract in which a borrower promises to pay a specified rate of interest to a lender for each period the bond is outstanding and repay the principal at the maturity date
debentures (unsecured bonds)
bonds for which no collateral has been pledged
secured bonds
bonds for which assets have been pledges in order to guarantee repayment
registered bonds
bonds for which the names and addresses of the bondholders are kept on file by the issuing company
coupon bonds
unregistered bonds for which owners receive periodic interest payments by clipping a coupon from the bond and sending it to the issuer as evidence of ownership
term bonds
bonds that mature in one single sum at a specified future date
serial bonds
bonds that mature in a series of installments at specified future dates
callable bonds
bonds for which the issuer reserves the right to pay the obligation before its maturity date
convertible bonds
bonds that can be traded for, or converted to, other securities after a specified period of time
zero-coupon (deep discount) bonds
bonds issued with no promise of interest payments; only a single payment will be made
junk bonds
bonds issued by companies in weak financial condition with large amounts of debt already outstanding; these bonds yield high rates of return because of high risk
bond indenture
a contract between a bond issuer and a bond purchaser that specifies the terms of a bond
principal (face value; maturity value)
the amount that will be paid on a bond at the maturity date
bond maturity date
the date at which a bond principal or face amount becomes payable
market rate (effective rate; yield rate) of interest
the actual interest rate earned or paid on a bond investment
stated rate of interest
the rate of interest printed on the bond
bond discount
the difference between the face value and the sales price when bonds are sold below their face value
bond premium
the difference between the face value and the sales price when bonds are sold above their face value
debt ratio
a measure of leverage, computed by dividing total liablities by total assets
debt-to-ratio ratio
the number of dollars of borrowed funds for every dollar invested by owners; computed as total liabilities divided by total stockholders' equity
times interest earned
a measure of a borrower's ability to make required interest payments; computed as income before interest and taxes divided by annual interest expense
straight-line amortization
a method of systematically writing off a bond discount or premium in equal amounts each period until maturity
effective-interest amortization
a method of systematically writing off a bond premium or discountthat incorporates the time value of money and results in an equal interest rate for each period
bond carrying value
the face value of bonds minus the unamortized discount or plus the unamortized premium
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