Term
Give the present value formula 

Definition


Term
Given the present value formula, how does an increase in the number of periods used (t) effect the present value? 

Definition
Increases in t cause PV to decrease 


Term
Given the present value formula, how does an increase in the interest rate effect the present value? 

Definition
Increases in r cause PV to decrease. 


Term
How does the market price a bond? 

Definition
1) Determine the PV of principal repayment (single amount) 2) Determine the present value of the interest payments 3) Add together for market price 


Term
How do you calculate the present value of principal repayment of a bond (1st step in pricing a bond) 

Definition
Standard present value formula with CF = bond face value. 


Term
How do you calculate the periodic interest payment a company makes? 

Definition
Face value of bond * coupon rate 


Term
How do you calculate the present value of the interest payments for a bond (second step in pricing) 

Definition


Term
With a periodic bond interest payment, what four things to you change on the statement of effects template? 

Definition
1) Cash 2) Retained Earnings (interest expense) 3) Bond payable net 4) Interest expense on income statement 

