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Bond Discount |
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Bond discount The difference by which a bond's market price is lower than its face value. The antithesis of a bond premium, which prevails when the market price of a bond is higher than its face value. See: Original issue discount.
Bond Discount A situation in which a bond's market value is lower than its face value. Short-term bonds are often issued at a bond discount, especially if they are zero-coupon bonds. However, bonds on the secondary market may trade at a bond discount, which occurs when supply exceeds demand. A bond discount is likely when the issuer has poor or recently downgraded credit, or when current interest rates are higher than the bond's. See also: Unamortized bond discount. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| Exhibit 5: Amortization of Bond Discount Using the Interest Method * $400,000 of 9%, five-year bonds (semi-annual interest payments) sold to yield 10% at January 1, 2001. Note: Receipt of cash does not always represent all of the interest income to be reported for Federal and state income tax purposes; amortization of bond discount is also included. 7 million and write-off of bond discount of approximately $0. |
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