ACG 2021 Chapter Notes - Chapter 12b: Effective Interest Rate, Amortization Schedule, Market Rate
Document Summary
Objective 12: stock- company selling a portion of ownership for money. They don"t ever have to return the money back: bond- securities that a corporation or government issue to borrow large amount of capital. The bond holders can also sell before waiting for maturity. Stated rate- rate of cash interest bond holder will receive per period (as stated in the contract): market rate (yield or effective interest rate)- interest rate that is currently based on the market. Par (face value)- principle value; the original stated value, maturity value: premium- bond is sold for more than par value. When market rate is lower than stated rate of interest: discount- when bond is sold for less than par value. Market rate is higher than stated rate of interest. When bond is sold first, it uses stated price. Pay interest at stated rate every period (n= compounding period calculation is only used for finding annuity).
