标题: simple question- FRA [打印本页] 作者: noel 时间: 2011-7-11 19:56 标题: simple question- FRA
im forgetting this from L1
investments in financial assets
why would interest income increase when the par value is more than historical cost for investment in debt securities?作者: thecfawannabe 时间: 2011-7-11 19:56
im referring to Reading 21; Q17作者: cv4cfa 时间: 2011-7-11 19:56
par > Historical Cost of investment
1000 > 900
So am I right in saying it is a discount Bond.
This means YTM < Coupon Rate on Bond.
YTM=5%, Coupon=6%
Par * Coupon = 60 (1000 * .06)
Face * YTM = 900 * .05 = 45
Amortization of Bond Discount = 60 - 45 = 15 <- gets added to Income statement.
Next Period Investment Cost = 900 + 25 = 915
CP作者: needhelp1700 时间: 2011-7-11 19:56
so the amortization of a discount bond gets added to the interest income under the effective interest method?
so how about the premium bond? it reduces the interest income and thus the net income?
by the way for discount bond: YTM is greater than coupon rate.
