bonds

Examples of bonds in the following topics:

• Bond Order

  • Bond order is the number of chemical bonds between a pair of atoms.
  • Bond order is the number of chemical bonds between a pair of atoms; in diatomic nitrogen (N≡N) for example, the bond order is 3, while in acetylene (H−C≡C−H), the bond order between the two carbon atoms is 3 and the C−H bond order is 1.
  • Bond order indicates the stability of a bond.
  • Bond order is also an index of bond strength, and it is used extensively in valence bond theory.
  • For a bond to be stable, the bond order must be a positive value.

• Taxes and Bond Prices

  • Taxes can cause bond prices and interest rates to differ.
  • For example, the U.S. government bonds have a lower risk of default and higher liquidity than municipal bonds, whereas municipal bonds are the state and local government bonds.
  • Government has exempted municipal bonds from federal taxes.
  • On the other hand, the taxed bonds are not as attractive as an investment, so investors buy fewer bonds, causing bond prices to fall and interest rates to rise.
  • Therefore, municipal bonds have a lower interest rate than U.S. government bonds.

• Types of Bonds

  • The most common secured bonds.
  • This bears the owner's name on the bond certificate and in the register of bond owners kept by the bond issuer or its agent, the registrar.
  • A term bond matures on the same date as all other bonds in a given bond issue.
  • Serial bonds in a given bond issue have maturities spread over several dates.
  • A bond with nondetachable warrants is virtually the same as a convertible bond; the holder must surrender the bond to acquire the common stock.

• Bond Valuation Method

  • A bond's value is measured by its sale price, but a business can estimate a bond's price before issuance by calculating its present value.
  • The bond's contract rate is another term for the bond's coupon rate.
  • If the market rate is greater than the coupon rate, the bonds will probably be sold for an amount less than the bonds' face value and the business will have to report a "bond discount. " The value of the bond discount will be the difference between what the bonds' face value and what the business received when it sold the bonds.
  • If the market rate is less than the coupon rate, the bonds will probably be sold for an amount greater than the bonds' value.
  • The business will then need to record a "bond premium" for the difference between the amount of cash the business received and the bonds' face value.

• Other Types of Bonds

  • Other bonds include register vs. bearer bonds, convertible bonds, exchangeable bonds, asset-backed securities, and foreign currency bonds.
  • Fixed rate bonds have a coupon that remains constant throughout the life of the bond.
  • Convertible bonds are bonds that let a bondholder exchange a bond for a number of shares of the issuer's common stock.
  • A serial bond is a bond that matures in installments over a period of time.
  • Eurodollar bond - U.S. dollar-denominated bond issued by a non-U.S.

• Redeeming Before Maturity

  • For bond issuers, they can repurchase a bond at or before maturity.
  • To be detailed, the bond issuer will repurchase bonds with callability.
  • These bonds are referred to as callable bonds.
  • Most callable bonds allow the issuer to repay the bond at par.
  • In this case, the price at which bonds are redeemed is predetermined in bond covenants.

• Issuing Bonds

  • On issuance, the journal entry to record the bond is a debit to cash and a credit to bonds payable.
  • Also, the bondholders may sell their bonds to other investors any time prior to the bonds maturity.
  • Bonds can sell for less than their face value, for example a bond price of 75 means that the bond is selling for 75% of its par (face value).
  • The amount of risk associated with the company issuing the bond determines the price of the bond.
  • Explain how a company would record a bond issue and how to determine the selling price of a bond

• Double and Triple Covalent Bonds

  • The double bond between the two carbon atoms consists of a sigma bond and a π bond.
  • A triple bond involves the sharing of six electrons, with a sigma bond and two $\pi$ bonds.
  • Triple bonds are stronger than double bonds due to the the presence of two $\pi$ bonds rather than one.
  • Experiments have shown that double bonds are stronger than single bonds, and triple bonds are stronger than double bonds.
  • Double bonds have shorter distances than single bonds, and triple bonds are shorter than double bonds.

• Hydrogen Bonding

  • A hydrogen bond is a type of dipole-dipole interaction; it is not a true chemical bond.
  • This hydrogen atom is a hydrogen bond donor.
  • Greater electronegativity of the hydrogen bond acceptor will create a stronger hydrogen bond.
  • Hydrogen bonds are shown with dotted lines.
  • Where do hydrogen bonds form?

• Bonds Issued at Par Value

  • To record a bond issued at par value, credit the "bond payable" liability account for the total face value of the bonds and debit cash for the same amount.
  • This generally means that the bond's market and contract rates are equal to each other, meaning that there is no bond premium or discount.
  • When the bond is issued, the company must record a liability called "bond payable. " This is generally a long-term liability.
  • Since the bonds are sold at par value, the amount of cash the company receives should equal the total face value of the issued bonds.
  • This is done by debiting the bond payable account and crediting the cash account for the full book value of the bond.