What Is an Interest Only Amortization Schedule?

Corporate bond interest amortization refers to the process of adjusting the nominal interest costs of bonds to actual interest costs.

Amortization of corporate bond interest

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Corporate bond interest amortization refers to the

Corporate bonds

The bonds issued by the company shall be paid in accordance with the prescribed interest payment period.

There are two amortization methods for the premium or discount of corporate bonds: the straight-line method and the actual interest method.

The straight-line bond discount or bond premium is a method of amortizing the various interest expenses evenly over the repayment period (or number of interest-bearing periods).

Amortization of coupon interest (interest payable) for this period = face value × coupon interest rate

Amortization of premium (or discount) in this period = total premium or discount ÷ number of interest-bearing periods

Interest expense in the current period = (Interest interest in the current period-Premium amortization in the current period) or (Interest interest in the current period + Discount amortization in the current period)

Amortization premium (or discount) at the end of the period = Book value (or discount) of the amortized bond at the beginning of the period-amortization of the premium (or discount) in the period

Book value of bonds payable at the end of the period = (book value of bonds payable at the beginning of the period-premium amortization of the current period) or (book value of bonds payable at the beginning of the period + discount amortization of the current period)

The actual interest method uses the beginning book value of each period of the bond multiplied by the actual interest rate to calculate the accrued interest expense of each period of the bond.

Interest expense for the current period = Book value of bonds payable at the beginning of the period × Actual interest rate

Current period premium (or discount) amortization amount = (current coupon rate-current interest expense) (negative absolute value is the discount amortization amount)

When amortizing (or discounting) corporate bond amortization based on the actual interest method, the book value of bonds that are gradually increased (or decreased) is multiplied by a fixed interest rate (the market interest rate at the time of issuance), so the amount of actual interest expenses must be Increase (or decrease) the period, subtract the fixed interest paid for each period from the increasing (decreasing) interest expense, and the discounted amortization amount also increases (or decreases) gradually.