Please explain the difference between a bond issued at face, a bond issued at a discount,...

Please explain the difference between a bond issued at face, a bond issued at a discount, and a bond issued at a premium

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Answer:

Bond Issue at face: A Bond's face value is the amount the issuer provides to the bondholder,once maturity is reached. A bond may either have an additional interest rate, or the profit may be based solely on the increase from a below -par original issue price and the face value at maturity. Face value refers to the amount of debt stated on the face of the bond certificate.

Bond issue at face value are on of the easiest type of bond transaction to account for.

Bond issue at discount: A Bond issued at a discount has its market price below the face value, creating a capital appreciation upon maturity since the higher face value is paid when the bond matures. Bonds are sold at a discount when the market interest rates exceeds coupon rate of the bond.

Bond Issue at premium : Bond issue at premium is refers to newly issued debt that is sold at a price in excess of its par value. When a bond is issued at a premium, the company will typically choose to amortize the premium paid over the term of bond using a straight line method.

A bond will trade at a premium when it offers an interest rate that is higher than the current prevailing interest rates being offered for new bonds. This is because investors want a higher yield and will pay for it

A bond selling at a premium is one that costs more than its face value. while a discount bond is one selling below face value.
Usually bonds with higher than current interest rates sell as a premium, while those with interest rate below prevailing rate sell at a discount.

ekkarill92 answered 1 year ago

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