The Yield on a Bond Is

question 92

Multiple Choice

The yield on a bond is

• A)the amount of money the borrower agrees to pay the bondholder each year divided by the face value of the bond.
• B)the amount of money the borrower agrees to pay the bondholder each year.
• C)the amount of money the borrower agrees to pay the bondholder each year divided by the current market price of the bond.
• D)the amount of principal that will be paid back when the bond matures.
• E)fixed for the life of the bond.

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Definitions:

Interest Incurred

The cost of borrowing money, represented as the amount charged by a lender to a borrower for the use of assets, typically expressed as an annual percentage of the principal.

Discounted Note

A promissory note or bond sold at a price lower than its face value, which will pay the face value at maturity.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the correct period.

Interest Income

Income earned from investments, savings, or credit extended, such as interest on bonds, savings accounts, or loans provided to others.