Flashcard- Chapter 12 Long-term Liabilities

Front

A debt that requires the borrower to make equal periodic payments to the lender for the term of the note.

Back

What is an installment note?

Front

What is a mortgage note?

Back

A note that is secured by an asset.

Front

The underlying contract between the company issuing bonds and the bondholders.

Back

What is a bond indenture?

Front

What factors affect the proceeds received from issuing bonds?

Back

The face amount of the bonds, the interest rate on the bonds, and the market rate of interest for similar bonds.

Front

What is the contract rate or coupon rate?

Back

The interest rate to be paid on the face amount of the bond.

Front

What is the market rate of interest?

Back

The rate determined from sales and purchases of similar bonds, also called the effective rate of interest.

Front

What happens if the market rate equals the contract rate?

Back

Bonds will sell at the face amount.

Front

What happens if the market rate is greater than the contract rate?

Back

The bonds will sell for less than their face value, and the difference is called a discount.

Front

What happens if the market rate is less than the contract rate?

Back

The bonds will sell for more than their face value, and the difference is called a premium.