what is amortization of bond premium?
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The amortizable bond premium is a tax term that refers to the excess price paid for a bond over and above its face value. Depending on the type of bond, the premium can be tax-deductible and amortized over the life of the bond on a pro-rata basis.
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What Is in an Amortization Table? An amortization table is a schedule that lists each monthly payment in a loan as well as how much of each payment goes to interest and how much to the principal. Every amortization table contains the same kind of information.
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Bonds are debt securities issued by corporations and governments. They usually come in denominations of between $100 and $1,000, which the issuer guarantees to pay when the bond matures. Between now and then, a fixed rate of interest will be paid on the security.
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Amortization. Amortization is the practice of spreading an intangible asset's cost over that asset's useful life. ... Examples of intangible assets that are expensed through amortization might include: Patents and trademarks.
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Amortization and depreciation are two methods of calculating the value for business assets over time. ... Amortization is the practice of spreading an intangible asset's cost over that asset's useful life. Depreciation is the expensing of a fixed asset over its useful life.
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Amortization is used to reflect the reduction in value of an intangible asset over its lifespan. Impairment occurs when an intangible asset is deemed less valuable than is stated on the balance sheet after amortization.
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According to Investopedia, a bond's coupon rate is the actual amount of interest income earned on the bond each year based on its face value. A bond's yield to maturity (YTM) is the estimated rate of return based on the assumption it is held until maturity date and not called.
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Here are several examples of fixed costs: Amortization. This is the gradual charging to expense of the cost of an intangible asset (such as a purchased patent) over the useful life of the asset. ... This is only a fixed cost if a fixed interest rate was incorporated into the loan agreement.
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Coupon Rate: An Overview. A bond's coupon rate is the rate of interest it pays annually, while its yield is the rate of return it generates. A bond's coupon rate is expressed as a percentage of its par value.
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Patent amortization is the tactic through which companies allocate the price of patents (intangible property) over a period of time. The system to calculate a patent's amortization is much like the straight-line depreciation calculations for other intangible property.
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Which statements are TRUE about the accretion of bond discounts? The best answer is A. When a bond discount is accreted, annually, the bond's cost basis is increased by the pro-rata amount of the discount and the accretion amount is shown as an increase of interest income received for tax purposes.
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Going forward the phrase “amortization expense” is only to be used for amortization of intangible assets such as goodwill, licenses, and trademarks. The debt issuance costs should be amortized over the length of the underlying loan.
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The amortization period is the total length of time it takes a company to pay off a loan—usually months or years. ... A company that takes a longer amortization period will have lower monthly payments but pay more interest overall. The term “amortization period” should not be confused with amortization expenses.
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GAAP sets the amortization period to the expected life of the loan which means the call or balloon date. For illustration purposes, seven years is used. If the loan is paid off early, any remaining balance of financing costs is expensed (recognized as a cost of business) at that time.
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The yield-to-maturity is the implied market discount rate given the price of the bond. A bond's price moves inversely with its YTM. An increase in YTM decreases the price and a decrease in YTM increases the price of a bond. The relationship between a bond's price and its YTM is convex.
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A fundamental principle of bond investing is that market interest rates and bond prices generally move in opposite directions. When market interest rates rise, prices of fixed-rate bonds fall. this phenomenon is known as interest rate risk.
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Your bond premium– or the cost of the bond– is only a fraction of the bond amount you are required to post. If you qualify for the standard bonding market, you can expect bonding rates in the range of 1% to 4% of the bond amount. A simple calculation shows that for a $10,000 bond, you can pay as low as $100.