F. Ernest Jerome
| Annual cost of a debt | The combined total of the annual interest payments on the debt and the annual payments into a sinking fund for retirement of the principal amount of the debt.
(See page 600.)
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| Bond | A debt instrument secured by specific assets. The bond issues (borrower) promises to periodically pay accrued interest, and to repay the full principal amount of the debt on the maturity date. The term "bond" is sometimes used in a generic sense to refer to both true bonds and debentures.
(See page 572.)
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| Bond discount | The amount by which a bond's face value exceeds its quoted price.
(See page 579.)
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| Bond premium | The amount by which a bond's quoted price exceed its face value.
(See page 580.)
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| Book value of a debt | The amount by which the principal balance owed on the debt exceeds the funds accumulated in a sinking fund for retiring the debt.
(See page 600.)
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| Coupon rate | The nominal annual rate of interest paid on the face value of a bond.
(See page 572.)
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| Debenture | A debt instrument having most of the characteristics of a bond except that no specific assets secure the debt.
(See page 572.)
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| Face value | (of a bond) The principal amount that the issuer will pay to the owner of a marketable bond on its scheduled maturity date.
(See page 572.)
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| Flat price | The actual or full amount paid by a bond purchaser and received by the seller. It is the quoted price plus the accrued coupon interest.
(See page 590.)
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| Issue date | The date on which a loan was made and on which interest starts to accrue.
(See page 572.)
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| Maturity date | The date on which the principal and accrued interest on an investment or loan are due.
(See page 572.)
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| Quoted price | The full purchase price (flat price) of a bond less any accrued coupon interest.
(See page 590.)
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| Sinking fund | An interest-earning account into which periodic payments are made for the purpose of accumulating a desired amount of money by a certain date.
(See page 595.)
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| Sinking fund schedule | A table presenting details of each period's increase in the sinking fund.
(See page 595.)
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| Yield to maturity | The market rate of return on the day the bond was purchased. The discount rate that makes the percent value of the bond's remaining cash flows equal to its purchase price. The rate of return a bond purchaser will earn if the bond is kept until it matures.
(See page 584.)
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2003 McGraw-Hill Higher Education