Bond definition. Analyzing the definition of key terms often provides more insight about concepts. Bond can be defined as – Written promis to pay the bond’s par (or face)value and interest at a stated contract rate; often issued in denominations of $1,000. Bonds are a way a company can generate capital, bonds being like a loan. One difference between a bond and a loan is that loans typically very the interest rate in the negotiation process, looking for a market rate while the interest rates on a bond is set. To sell a bond where the market rate is difference then the bond rate the company will need to accept more or less money then the face amount of the bond, more or less money then will be repaid at the end of the bond term. If the market rate is greater than the bond rate the company will accept less than the face amount for the bond and if the market rate is more than the bond rate the company will require more than the face amount of the bond. This difference will result in a discount or premium to be recorded. The carrying amount of the bond will need to take into account the outstanding discount or premium.
