CPAnet Forum: Face/Stated rate of Bonds

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Topic: Face/Stated rate of Bonds (

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Kim4
Newbie
Newbie

Joined: 19 Jun 2011
Online Status: Offline
Posts: 6

Posted: 22 Apr 2012 at 13:39 \| IP Logged

Hey, everyone -- I'm taking FAR on Friday, and I'm just trying to get
things straight in my head.

If I'm wrong here -- please point me in the right direction, thanks.

When you present value the principal and the interest for bonds, you use
the market rate. When you do the effective interest method, you multiply
the carrying value by the market rate.

When you are trying to find the actual cash payment, that's when you
multiply the face value by the stated/face rate.

Is that the only time that you use the stated/face rate? I can't think of any
other time right now that you would use the stated/face rate.

msod1273
Regular
Regular

Joined: 04 Oct 2010
Online Status: Offline
Posts: 179

Posted: 22 Apr 2012 at 16:01 \| IP Logged

The stated/coupon rate is mutliplied with the Face Amount of the Bond to get the cash payments.

The stated rate is only applied to get the cash payments and not anywhere else when working with bonds.

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