What Is Effective Interest Amortization?

In the actual amortization method, the actual interest rate is the market interest rate, which is used to find the issue price of the bond. Investors are included in investment income ~ held-to-maturity investments (issue price multiplied by interest rate), and issuers are included in construction in progress or financial costs.

Actual amortization

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In the actual amortization method, the actual interest rate is the market interest rate, which is used to find the issue price of the bond. Investors are included in investment income ~ held-to-maturity investments (issue price multiplied by interest rate), and issuers are included in construction in progress or financial costs.

The real interest rate is the market interest rate, which is used to find the bond issue price. Investors are included in investment income ~ held-to-maturity investments (issue price multiplied by interest rate), and issuers are included in construction in progress or financial costs

Multiply the market interest rate at the time of purchase (issuance) by the present value of the beginning of each period of bond investment (liability), that is, the book value, to find the actual interest income (usage) for that period. This interest income (expense) and actual income The difference between the interest received is the current premium or discount amortization amount. Expressed by the formula: Current interest at the beginning of the current bond investment market: two income (expenses) one (liability) book value "interest rate premium received (paid) interest in the current period interest amortization of current period one" or current interest receivable (payable) interest one income (Expenses) Current interest received during the discount period (amortization) of interest amortization (income (expenses)) or interest receivable (payable) of the current interest rate method, the bond premium and the book value of the bonds gradually decrease, interest income (expense) It also decreases correspondingly, but the premium amortization increases gradually; if the discount is issued, the bond's book value increases gradually, the interest income (expense) also increases accordingly, and the discount amortization also increases gradually.