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When bonds are issued at a premium what is the affect on interest?
Wiki User
∙ 11y ago
Bonds issued at a premium offer an interest rate that is above the market interest rate.
Typically, a bond issuer offers a premium interest rate to offset higher risk associated with a bond offering that has a low credit rating.
A purchaser of a bond offered at a premium will receive a higher interest rate but will incur a higher degree of credit risk.
Wiki User
∙ 11y ago
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Should bonds issued at a premium always have?
Bonds issued at a premium always have
What services do NSandI premium bonds provide?
The NS&I Premium Bonds is a lottery bond issued by the United Kingdom. Premium Bonds was introduced by Harold Macmillan in the year 1956 and provides instead of paying the interest to a bond, it pays with a prize fund from which a monthly lottery distributes tax-free prices.
What are some benefits of buying premium bonds?
Premium bonds offer higher interest rates than bonds sold at par. However, there is a premium cost that one must pay. Don't let that deter you, as the extra interest should more than pay the premium when the bond reaches maturity. The other benefit of Premium bonds is that they are less volatile than par bonds.
What banks provide high interest bonds to customers?
High interest bonds are not issued by banks; they are issued by corporations that do not meet the standards of an investment-grade bonds. Like stocks, they are a corporate investment.
Bonds usually sell at a premium when?
when interest rates in the general market fall. This makes the interest rate on the bond relatively more attractive.
Should bonds issued at a premium always have?
Bonds issued at a premium always have
When effective interest method is used to amortize bond premium or discount the periodic amortization will be?
increasse if the bonds were issued at either a discount or premium.
XYZ Corp sells its bonds at a premium and applies the effective interest method in amortizing the premium.Do you think the annual interest expense will increase or decrease over the life of the bonds?
It really depends on how much is the premium paid. Effectively if the premium paid is higher than the par value of the bonds issued, the annual interest expense would be relatively lower. Another perspective is that since that both the bonds and its premium uses effective interest method, considering all factors remain the same, the annual interest expense will remain unchanged. Premium of the bond should be captialized within the holders of the bonds and amortized over the years in which the manner best represents. Issuer of the bonds generally do not captialize the premium of the bond separately. You should also note that the bonds issued are not compound financial instruments or contain any embedded derivates.
What services do NSandI premium bonds provide?
The NS&I Premium Bonds is a lottery bond issued by the United Kingdom. Premium Bonds was introduced by Harold Macmillan in the year 1956 and provides instead of paying the interest to a bond, it pays with a prize fund from which a monthly lottery distributes tax-free prices.
What are some benefits of buying premium bonds?
Premium bonds offer higher interest rates than bonds sold at par. However, there is a premium cost that one must pay. Don't let that deter you, as the extra interest should more than pay the premium when the bond reaches maturity. The other benefit of Premium bonds is that they are less volatile than par bonds.
Amortization schedule for bonds issued at a premium?
All of the above are correct
What does it mean when bonds are issued at premium?
The bond price exceeds the par price when issued at a premium and declines to the par value as it gets closer to maturity.
What banks provide high interest bonds to customers?
High interest bonds are not issued by banks; they are issued by corporations that do not meet the standards of an investment-grade bonds. Like stocks, they are a corporate investment.
What happens when issuing bonds payable when the market interest rate is less than the stated interest rate?
premium
Why some bonds are taxable in Federal as well State?
Nearly all bonds are taxable both federal and state. To be exact, the interest the bonds pay is taxable (as well as any capital gain resulting from trading bonds). The reason is that the tax code taxes interest. Bonds are a way of borrowing money and paying interest to the lender. Bonds issued by the federal government are exempt from state taxes. Bonds issued by states and municipalities are mostly exempt from federal taxes (and exempt from taxes in the state that issued them in some states).
How can bonds issued by two companies paying same contractual interest rate be issued at different prices?
To calculate present value of the bond you also need to know market interest rate. If , for example these companies were issuing their bonds in the different time and market interest rate was different then bond could be sold at premium(the bond will cost more then its face value), par (same as face value), and discount (bond will cost less then face value.)
What are bonds in history?
a note issued by the government which promises to pay off a loan with interest.
