Bonds and Issuance terminology

Bonds Payable

A business entity issues bonds to raise cash for a variety of reasons. They either need it for expansion or they want to be able to be able to have an emergency stand by cash. The printed bond certificate has the principal amount printed in it. Another name for the principal value is maturity value and face value. The interest rates as well as the length of time that it will take to mature are also indicated in the bond certificate. The bonds that are issued are sometimes sold at premium in case investors perceive it as worth more than it states. The bond is issued as sub-prime in case the value of the bond is lower than expectations of the investors and there are significant risks associated with the issuer. This is to entice the investors to buy the bonds.
The term issued at par means that the bond has been issued at its actual value written in the certificate.

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One Response to “Bonds and Issuance terminology”

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