So let's check out this example here on january 1st 2018 abc company issues $100,000 of 9% bonds, maturing in five years. Because now what we're gonna use is we're gonna use those time value of money concepts that we learned previously, we're going to start applying those to the value of these bonds. Now if you're still struggling with that, I suggest going back to the previous videos and studying again the discounts and the premiums and those journal entries because it's about to get a little more complicated with the effective interest method. Well now the price of the bond will be greater than face value. Right? And if the stated rate is greater than market rate, so 12% stated rate, 10% market rate. The price of the bond is going to be less than the face value. Just like we've been discussing The stated rate and the market rate with the stated rate let's say is 8% and the market rate is 10%. So if the stated rate of a bond is says 10% and the market rate is 10%, well, the price of the bond today when we sell it, it's going to be equal to the face value. So first thing I want to review with you is the the relationship between the stated rate of the bond and the market rate on other similar bonds. The effective interest method for the amortization of bond premium or discount. It's the effective interest method of amortization for the bond premium or discount. Alright, so this is about as tough as this course can get.
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