For investors, there can betax implicationsfor the amortization of bond premiums or discounts. Bond premiums may be tax deductible in some situations. On the other hand, bond discounts may be taxed as ordinary income. It should also be noted that, depending on the issuer, amortized bonds can...
Understanding Bond ETF Premiums and Discounts: A conceptual frameworkby Matthew TuckerStephen Laipply
AN ALTERNATIVE APPROACH FOR TEACHING THE INTEREST METHOD AMORTIZATION OF BOND PREMIUMS AND DISCOUNTSamortization. Accountants using this approach divide the initial unamortized bonddiscount or premium by the number of bond interest payments until the maturity date to determine the amortization am...
depending on the difference between the documentedbond coupon rate and the market interest rateat the time of the issuance. Bond premiums allow the bond issuer to sell at higher bond prices due to lower market rates, while bond discounts force the issuer to take less than the face value due...
The bond interest expense includes the amortization of discounts or premiums on the bonds a company issues for the entire reporting period, depending on the sale price. Also, it includes the bond issue costs amortization for a similar period. ...
1 By indenture or statute the Trustee is empowered to make bond investments. The indenture is either silent or vague in generalities as toSeacrest, Joe RNeb.l.rev
credit ratings), bonds can be purchased at discounts or premiums relative to par. Moreover, the current market prices of bonds can be categorized into three buckets: Discount Bond → Yield to Maturity (YTM) > Coupon Rate Par Bond → Yield to Maturity (YTM) = Coupon Rate Premium Bond → ...
The business outlook, stock market-wide average interest rates, and a company’s financial performance all affect a bond’s trading price. Bonds from higher-risk corporations typically trade at premiums to par, whilst bonds from lower-risk companies typically trade at discounts to the bonds’ face...
Investors and analysts often use effective interest rate calculations to examine premiums or discounts related to government bonds, such as the 30-year U.S. Treasury bond, although the same principles apply to corporate bond trades. When the stated interest rate on a bond is higher than the cur...
Amortization is an accounting method that gradually and systematically reduces the cost value of a limited-life, intangible asset. Effective-interest and straight-line amortization are the two options for amortizing bond premiums or discounts. The easiest way to account for an amortized bond is to u...