Introduction to Bonds Payable

A bond is a long-term debt instrument where the issuer promises to pay the bondholder periodic interest (coupon) payments and return the face (par) value at maturity. Companies issue bonds to raise large amounts of capital without diluting ownership.

Face Value (Par): The amount repaid at maturity, typically $1,000. Stated (Coupon) Rate: The interest rate printed on the bond, determines cash interest paid. Market (Effective) Rate: The rate investors actually demand based on risk. Maturity Date: When the face value must be repaid.