Held-to-Maturity (HTM) Securities definitions Flashcards
Held-to-Maturity (HTM) Securities definitions
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Held-to-Maturity Investments Debt securities acquired with the intent and ability to hold until maturity, reported at amortized cost on the balance sheet. Principal Amount Face value of a bond, representing the sum to be repaid to the investor at maturity, regardless of purchase price. Stated Rate Interest rate specified on the bond, used to calculate periodic interest payments to the bondholder. Market Rate Prevailing interest rate in the market for similar bonds, influencing a bond's selling price as premium or discount. Premium Excess of a bond's purchase price over its principal, arising when the stated rate exceeds the market rate. Discount Shortfall of a bond's purchase price below its principal, occurring when the stated rate is less than the market rate. Amortization Systematic allocation of premium or discount over the bond's life, adjusting the investment's book value to principal at maturity. Straight-Line Method Technique dividing total premium or discount evenly across all interest periods, simplifying amortization calculations. Bonds Receivable Asset account recording the principal amount of bonds owned by an investor, separate from any premium or discount. Interest Revenue Income recognized from earning interest on bonds, including both cash received and amortized premium or discount. Semiannual Interest Interest payments made twice a year, requiring division of annual stated rate by two for each payment calculation. Amortized Cost Carrying value of an investment after adjusting for cumulative amortization of premium or discount. Journal Entry Accounting record documenting transactions such as bond purchases, interest receipts, and amortization adjustments. Net Assets Total assets minus total liabilities, affected by changes in investment values and interest revenue recognition. Balance Sheet Financial statement presenting assets, liabilities, and equity, including held-to-maturity investments at amortized cost.
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