Hey guys, I think this may be a Level 1 type review, but wanted to make sure I had this right: For a discount bond, classified as Held to Maturity: Balance sheet value = 96,209 YTM = 10% Coupon = 9% Total interest income = 96,209 * 10% YTM = 9,621 Total interest income = 9,000 Coupon + 621 discount amortization = 9,621 Income recognized in Income Statement = 9,621 New value of bond on balance sheet = 96,830 For a premiun bond, classified as Held to Maturity: Balance sheet value = 103,000 YTM = 5% Coupon = 6% Total interest income = 103,000 * 5% YTM = 5,150 Total interest income = 6,000 Coupon - 850 premium amortization = 5,150 Income recognized in Income Statement = 5,150 New value of bond on balance sheet = 102,150 Thanks for the help! Income recognized in Income Statement = 9,621 New value of bond on balance sheet = 96,830
That’s correct. I just start with interest income (YTMxValue) and then subtract the coupon payment and net it against the value of the bond.
Thanks!