effect of bond issue on income statement
No, it would not show up on the income statement as it isn't income. It would show up in the cash flow statement as a result of financing activities.
I looked into the investopedia one (all their videos are mazing), but that detail just was not clear to me, it also makes be wonder, if a country issues bonds to finance itself, what happens at maturity when literally millions of them  need to be paid? The income needs to have grown to that level or it defaults? Wouldn't all the countries default if that was the case, or are bonds being issued to being able to pay maturity of older bonds already?  (I'm freaking myself out by realizing this) Assuming you are saying that the company issues 20,000 additional shares of its own stock and sells them for $8 each: The money from the sale is not income and not part of earnings.  It is capital and appears on the balance sheet as part of shareholder's equity. With no other transactions, yes, the total of shares outstanding is increased by 20,000 to 100,000. "The most fundamental observation of bond pricing is this: Bond price is inversely proportional to bond yields  When bond yields rise, the price of the bond falls.  When bond yields fall, the price of the bond rises.  Higher rates are ""bad"" for bonds. If a selloff occurs in the Russian government bond space (i.e. prices are going down), the yield on that bond is going to increase as a consequence." Yes this would be the same as when a corporation sells bonds. If it is the same as you describe. A product page would make it possible to give you a definitive answer. Also I strongly advice against taking out this type of loan if not for investment "This effect has much empirical evidence as googling ""dividend price effect evidence"" will show. As the financial economic schools of thought run the gamut so do the theories.  One school goes as far to call it a market inefficiency since the earning power thus the value of an equity that's affected is no different or at least not riskier by the percentage of market capitalization paid. Most papers offer that by the efficient market hypothesis and arbitrage theory, the value of an equity is known by the market at any point in time given by its price, so if an equity pays a dividend, the adjusted price would be efficient since the holder receives no excess of the price instantly before payment as after including the dividend since that dividend information was already discounted so would otherwise produce an arbitrage." "The federal funds rate is one of the risk-free short-term rates in the economy. We often think of fixed income securities as paying this rate plus some premia associated with risk. For a treasury security, we can think this way: (interest rate) = (fed funds rate) + (term premium) The term premium is a bit extra the bond pays because if you hold a long term bond, you are exposed to interest rate risk, which is the risk that rates will generally rise after you buy, making your bond worth less.  The relation is more complex if people have expectations of future rate moves, but this is the general idea.  Anyway, generally speaking, longer term bonds are exposed to more interest rate risk, so they pay more, on average. For a corporate bond, we think this way: (interest rate) = (fed funds rate) + (term premium) + (default premium) where the default premium is some extra that the bond must pay to compensate the holder for default risk, which is the risk that the bond defaults or loses value as the company's prospects fall.  You can see that corporate and government bonds are affected the same way (approximately, this is all hand-waving) by changes in the fed funds rate. Now, that all refers to the rates on new bonds.  After a bond is issued, its value falls if rates rise because new bonds are relatively more attractive.  Its value rises if rates on new bonds falls.  So if there is an unexpected rise in the fed funds rate and you are holding a bond, you will be sad, especially if it is a long term bond (doesn't matter if it's corporate or government).  Ask yourself, though, whether an increase in fed funds will be unexpected at this point.  If the increase was expected, it will already be priced in.  Are you more of an expert than the folks on wall-street at predicting interest rate changes?  If not, it might not make sense to make decisions based on your belief about where rates are going.  Just saying. Brick points out that treasuries are tax advantaged.  That is, you don't have to pay state income tax on them (but you do pay federal). If you live in a state where this is true, this may matter to you a little bit. They also pay unnaturally little because they are convenient for use as a cash substitute in transactions and margining (""convenience yield"").  In general, treasuries just don't pay much.  Young folk like you tend to buy corporate bonds instead, so they can make money on the default and term premia." "I think a lot of this goes to the short-sightedness of the government that was in place at the time of the first default. They caused it, and their attempt at cleaning things up just kicked the can down the road. If they would have added in a ""class action"" clause that most bonds now have, what they settled with a majority would apply to all bond-holders.   What they did was the opposite: added in a clause in which the low-water mark was set by the deal that was least favourable for them. It was probably a misguided attempt at assuaging the markets with the consequences we now see..." "Eh. A FICO change is more important than you think.  Underwriting waterfalls almost always include **minimum** FICO scores. This only really becomes important when you get into securitization and the standards (both GSE and Private-Label) required for MBS issuance. Because -- of course -- an underwriter can originate a loan and then hold it it on the books (this is very prevalent in non-conforming Jumbo loans).  That said, if you want to sell the whole loans to a GSE or private label, they have to meet underwriting requirements (Reps &amp; Warranties).   To your original answer: you're right that it probably won't make a difference but not because FICO doesn't matter. Moreso because there are only 9 million potential ""borrowers"" affected and that 9 million most likely doesn't constitute any real demand for mortgages.  This also ignores the possibility that FICO requirements in underwriting standards adjust to FICO 9; but I really doubt that they will." "To your first comment: yup. To your second comment, A = L + E. If E goes down, and L goes up, the net effect is 0. Then, if L goes down, and A goes up, the net effect is 0 and we are balanced once again. There is no ""rebalancing"" equity. You just have to make sure that, at the end of your journal entries, the accounting equation holds.  It's a very unintuitive concept to wrap your head around, but spend some time mapping out the flow of various journal entries. Once it clicks, you'll really understand the logic." "Hey guys I have a quick question about a financial accounting problem although I think it's not really an ""accounting"" problem but just a bond problem.  Here it goes    GSB Corporation issued semiannual coupon bonds with a face value of $110,000 several years ago. The annual coupon rate is 8%, with two coupons due each year, six months apart. The historical market interest rate was 10% compounded semiannually when GSB Corporation issued the bonds, equal to an effective interest rate of 10.25% [= (1.05 × 1.05) – 1]. GSB Corporation accounts for these bonds using amortized cost measurement based on the historical market interest rate. The current market interest rate at the beginning of the current year on these bonds was 6% compounded semiannually, for an effective interest rate of 6.09% [= (1.03 × 1.03) – 1]. The market interest rate remained at this level throughout the current year. The bonds had a book value of $100,000 at the beginning of the current year. When the firm made the payment at the end of the first six months of the current year, the accountant debited a liability for the exact amount of cash paid. Compute the amount of interest expense on these bonds for the last six months of the life of the bonds, assuming all bonds remain outstanding until the retirement date.  My question is why would they give me the effective interest rate for both the historical and current rate?  The problem states that the firm accounts for the bond using historical interest which is 10% semiannual and the coupon payments are 4400 twice per year.  I was just wondering if I should just do the (Beginning Balance (which is 100000 in this case) x 1.05)-4400=Ending Balance so on and so forth until I get to the 110000 maturity value. I got an answer of 5474.97 and was wondering if that's the correct approach or not." "I have a quick question about statement of cash flows and how Account Receivable (Net) and Prepaids affect it (I've already asked the accounting subreddit but was wondering if anyone who does fundamental analysis etc would have a take on it).   It stems from a homework problem where I have to reconstruct a cash flow statement using two comparative balance sheets (end of period 2013 and end of period 2014) and a change in retained earnings statement.  The following transaction took place in 2014   ""The firm wrote off accounts receivable as uncollectible totaling $16,300 in 2013 and $18,500 in 2014. It recognized expired insurance of $4,100 in 2013 and $3,900 in 2014.""  My understanding is that the write offs have already been subtracted in order to yield Account Receivable (Net) and therefore I can just take the change in that account and make the appropriate entry.  For the recognition of expired insurance I can simply take the change in the Prepayment account and record the appropriate cash flow entry.  Am I correct in assuming this? Or did they give me those amounts in order to figure out Accounts Receivable (Gross) and take the change in that?" "The answer is yes. And the reason is if today's interest rates are lower than the interest rate (coupon) at which the bond was issued. The bond's ""lifetime value"" is 100 cents on the dollar. That's the principal repayment that the investor will get on the maturity date. But suppose the bond's coupon rate is 4% while today's interest rate is 3%. Then, people who bought the bond at 100 would get 4% on their money, while everyone else was getting 3%. To compensate, a three year bond would have to rise to almost 103 so that the so-called yield to maturity"" would be 3%. Then there would be a ""capital loss"" (from almost 103 to 100) that would exactly offset the extra interest, that is 1% ""more"" for three years. If today's interest rates are negative (as they were from time to time in the 1930s, and in the present decade), the ""negative"" interest rates will prevent the buyer from getting the ""lifetime value"" (as defined by the OP) of principal plus interest over the original life of the bond. This happens in a ""flight to quality"" situation, where people are willing to take a (small) capital loss on Treasuries in order to prevent a large possible loss from bank failures like those that took place in 2008." In the question you cited, I assumed immediate exercise, that is why you understood that I was talking about 30 days after grant. I actually mentioned that assumption in the answer. Sec. 83(b) doesn't apply to options, because options are not assets per se. It only applies to restricted stocks. So the 30 days start counting from the time you get the restricted stock, which is when you early-exercise. As to the AMT, the ISO spread will be considered AMT income in the year of the exercise, if you file the 83(b). For NQSO it is ordinary income. That's the whole point of the election. You can find more detailed explanation on this website. "The first thing that it is important to note here is that the examples you have given are not individual bond prices.  This is what is called the ""generic"" bond price data, in effect a idealised bond with the indicated maturity period.  You can see individual bond prices on the UK Debt Management Office website. The meaning of the various attributes (price, yield, coupon) remains the same, but there may be no such bond to trade in the market.  So let's take the example of an actual UK Gilt, say the ""4.25% Treasury Gilt 2019"".  The UK Debt Management Office currently lists this bond as having a maturity date of 07-Mar-2019 and a price of GBP 116.27.  This means that you will pay 116.27 to purchase a bond with a nominal value of GBP 100.00.  Here, the ""nominal price"" is the price that HM Treasury will buy the bond back on the maturity date.   Note that the title of the bond indicates a ""nominal"" yield of 4.25%.  This is called the coupon, so here the coupon is 4.25%.  In other words, the treasury will pay GBP 4.25 annually for each bond with a nominal value of GBP 100.00.  Since you will now be paying a price of GBP 116.27 to purchase this bond in the market today, this means that you will be paying 116.27 to earn the nominal annual interest of 4.25.  This equates to a 3.656% yield, where 3.656% = 4.25/116.27.   It is very important to understand that the yield is not the whole story.  In particular, since the bond has a nominal value of GBP100, this means that as the maturity date approaches the market price of the bond will approach the nominal price of 100. In this case, this means that you will witness a loss of capital over the period that you hold the bond.  If you hold the bond until maturity, then you will lose GBP 16.27 for each nominal GBP100 bond you hold.  When this capital loss is netted off the interest recieved, you get what is called the gross redemption yield.  In this case, the gross redemption yield is given as approximately 0.75% per annum. NB.  The data table you have included clearly has errors in the pricing of the 3 month, 6 month, and 12 month generics." With the formula you are using you assume that the issued bond (bond A) is a perpetual. Given the provided information, you can't really do more than this, it's only an approximation.  The difference could be explained by the repayment of the principal (which is not the case with a perpetual). I guess the author has calculated the bond value with principal repayment.  You can get more insight in the calculation from the excel provided at this website: http://breakingdownfinance.com/finance-topics/bond-valuation/fixed-rate-bond-valuation/