Match these terms with their definitions.
-The use of borrowed capital to produce more income than needed to pay the interest on the debt.
A)Bond
B)Contract, coupon, stated rate
C)Discount
D)Effective interest rate method
E)Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question

Quizplus · Accepted Answer

Here's the full list of terms matched with their most appropriate definitions:
A) Bond - A debt security, under which the issuer owes the holders a debt and is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity.
B) Contract, coupon, stated rate - The terms of a bond or other fixed-income investment that specify the interest rate (coupon or stated rate) paid to the investor.
C) Discount - The amount by which a bond or other security is sold below its face value.
D) Effective interest rate method - An accounting practice used for amortizing the discount or premium on bonds payable.
E) Face value, par value, principal - The nominal value or dollar value of a security stated by the issuer. For bonds, it is the amount paid to the holder at maturity.
F) Interest amortization - The process of spreading out a loan into a series of fixed payments over time, part of each payment is applied to the interest and the remainder to the principal.
G) Lease - A contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset.
H) Lessee - The user of an asset, under a lease agreement.
I) Lessor - The owner of an asset that is leased under a lease agreement.
J) Leverage - The use of borrowed capital to produce more income than needed to pay the interest on the debt.
K) Long-term debt - Debt that is not due for at least one year and often extends for many years.
L) Market rate, yield - The current rate of return demanded by the market for a bond or other security.
M) Maturity - The date on which the life of a financial instrument ends, after which it must either be renewed or it will cease to exist.
N) Premium - The amount by which a bond or other security is sold above its face value.
O) Straight-line method - A method of allocating an equal amount of the discount or premium on bonds payable over each period until maturity.

Match These Terms with Their Definitions