[say]

In calculating the PV of a bond at a certain point in time, do you discount it by the number of periods left to maturity, or the total number of periods of the bond? Say there are a total of 5 periods, but 3 periods have passed. Would it be discounted by the factor of the 5 or the 2?

[12tang]

Periods left to maturity. As bonds mature, you amortize them, such that the balance sheet reflects their current value via amortization. If you did the original term for valuing, you'd be over-valued on the Balance sheet.

Using Becker self-study
FAR: (82) 175 hours - 1st attempt
BEC: (XX)
AUD: (69) 45hrs of study - 1st attempt
REG: (XX)

[say]

What if it is to assess the market value of the bond at the present? Not considering what it is recorded for on the balance sheet, but if you were to sell that bond out in the market at that time?

[12tang]

If you reclassed the held to maturity bond to a trading security, you'd present it at Fair value. The terms of the bond itself do not determine fair value. The market will dictate what you report the bond at. So the effective interest rate (not stated) will be used and the remaining periods of the bond would be used to help you find the PV factor.

Using Becker self-study
FAR: (82) 175 hours - 1st attempt
BEC: (XX)
AUD: (69) 45hrs of study - 1st attempt
REG: (XX)

[Author]

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