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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.