increase market interest will affect bond in D/B?

CFA Level I FRA
#1

Am i right to think like this!!!

when interest increase, a bond of a company will repricing by lower like 1000 to 950

and with certainty that the debt will decrease and D/E will increase right?

-bond that are funding company, what cost is used, is it will re-value?

-bond that are held to sell, it mark in balance sheet as asset at purchasing cost right?

#2

Most companies report bonds that they have issued at amortized value (par value, with any premium or discount amortized over the life of the bonds); thus, changes in the market value of the bond will have no effect on the D/E ratio.

Some companies report bonds that they have issued at market value. In that case, changes in market value will affect the D/E ratio.

When a company invests in bonds (government bonds or another company’s bonds), they can consider them to be:

  • Held-to-maturity securities: reported at amortized cost; changes in market value will not affect the D/E ratio
  • Available-for-sale securities: reported at fair market value; changes in market value will affect the D/E ratio
  • Held-for-trading securities: reported at fair market value; changes in market value will affect the D/E ratio
  • Designated-at-fair-value securities: reported at fair market value; changes in market value will affect the D/E ratio
#3

thank you so much, cystal clear

#4

Good to hear.

You’re quite welcome.