(See related pages)
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| Annuity | A series of equal payments occurring at equal time intervals. (See page(s) 870) |
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| Bearer bonds | Bonds that are made payable to whomever holds them (called the bearer); also called unregistered bonds. (See page(s) 866) |
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| Bond | A written promise to pay an amount identified as the par value of the bond along with interest at a stated annual amount; usually issued in denominations of $1,000. (See page(s) 862) |
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| Bond certificate | A document containing information about the bond, such as the issuer's name, the bond's par value, the contract interest rate, and the maturity date. (See page(s) 862) |
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| Bond indenture | The contract between the bond issuer and the bondholders; it identifies the rights and obligations of the parties. (See page(s) 867) |
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| Callable bonds | Bonds that give the issuer an option of retiring them at a stated dollar amount prior to maturity. (See page(s) 866) |
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| Capital lease | A lease that gives the lessee the risks and benefits normally associated with ownership. (See page(s) 898) |
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| Carrying value | The net amount at which bonds are reflected on the balance sheet; equals the par value of the bonds less any unamortized discount or plus any unamortized premium; also called the book value of the bonds. (See page(s) 872) |
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| Contract rate | The interest rate specified in the bond indenture; it is multiplied by the par value of the bonds to determine the amount of interest to be paid each year; also called the coupon rate, the stated rate, or the nominal rate. (See page(s) 862) |
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| Convertible bonds | Bonds that can be exchanged by the bondholders for a fixed number of shares of the issuing company's common shares. (See page(s) 866) |
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| Coupon bonds | Bonds that have interest coupons attached to their certificates; the bondholders detach the coupons when they mature and present them to a bank or broker for collection. (See page(s) 866) |
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| Debentures | See unsecured bonds. (See page(s) 865) |
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| Discount/Discount on bonds payable | The difference between the par value of a bond and its lower issue price; arises when the contract rate is lower than the market rate. (See page(s) 867, 871) |
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| Effective interest method | Allocates interest expense over the life of the bonds in a way that yields a constant rate of interest; interest expense for a period is found by multiplying the balance of the liability at the beginning of the period by the bonds' original market rate. (See page(s) 874) |
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| Effective interest rate | See market rate of interest. (See page(s) 867) |
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| Financial leverage | When a company earns a higher return with borrowed funds than it is paying in interest, the result is an increase in return on equity. (See page(s) 865) |
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| Installment note | An obligation requiring a series of periodic payments to the lender (See page(s) 839) |
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| Market rate of interest | The interest rate that borrowers are willing to pay and that lenders are willing to earn for a particular bond given its risk level. Also called the effective interest rate. (See page(s) 867) |
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| Mortgage | A legal agreement that protects a lender by giving the lender the right to be paid out of the cash proceeds from the sale of the borrower's specific assets identified in the mortgage. (See page(s) 892) |
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| Operating lease | A short-term lease that does not require the lessee to record the right to use the property as an asset or to record any liability for future lease payments. (See page(s) 898) |
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| Par value of a bond | The amount that the bond issuer agrees to pay at maturity and the amount on which interest payments are based; also called the face amount or face value. (See page(s) 862) |
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| Premium/Premium on bonds | The difference between the par value of a bond and its higher issue price; arises when the contract rate is higher than the market rate. (See page(s) 867, 876) |
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| Redeemable bonds | Bonds that give the purchaser an option of retiring them at a stated dollar amount prior to maturity. (See page(s) 866) |
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| Registered bonds | Bonds owned by investors whose names and addresses are recorded by the issuing company; the interest payments are made with cheques to the registered owners. (See page(s) 865) |
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| Secured bonds | Bonds that have specific assets of the issuing company pledged as collateral. (See page(s) 865) |
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| Serial bonds | Bonds that mature at different dates with the result that the entire debt is repaid gradually over a number of years. (See page(s) 865) |
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| Straight-line method (interest allocation) | A method of amortization that allocates an equal amount of interest to each accounting period in the life of bonds. (See page(s) 873) |
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| Term bonds | Bonds that are scheduled for payment (mature) at a single specified date. (See page(s) 865) |
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| Unsecured bonds | Bonds that are backed by the issuer's general credit standing; unsecured bonds are almost always more risky than unsecured bonds; also called debentures. (See page(s) 865) |