Held-to-Maturity Debt Securities
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- Опубликовано: 6 фев 2025
- This video explains how to account for Held-to-Maturity Securities. A comprehensive example is provided to illustrate how Held-to-Maturity Securities are valued on the Balance Sheet at amortized cost. The video also shows the journal entries required to recognize interest revenue from the Held-to-Maturity Securities.
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For all those who did not realize how we got the figure of the 1,052,486 :
The formula would be (PV 1,000,000) + (PVOA 90,000)
PV = 1,000,000 / (1+0,07)^3
= 1,000,000 / (1.07)^3
= 1,000,000 / 1.225043
=816,297.87
PVOA = 90,000 * ((1-((1/(1+.07)^3))/.07)
= 90,000 * ((1-((1/1.07)^3))/.07)
= 90,000 * ((1-((1/1.225043))/.07
= 90,000 * ((1-(0.816297)/.07)
= 90,000 * (0.18370/.07)
= 90,000 * 2.62431
=236,188.44
816,297 + 236,188.44 = 1,052,486.31
PVOA = PMT * [1 - [ (1 / 1+r)^n] / r] where:
P = Present value of your annuity stream
PMT = Dollar amount of each payment
r = Discount or interest rate
n = Number of periods in which payments will be made
Your videos are great for supplemental understanding when studying for the CMA exam
You helped me pass intro to accounting with your videos and now you're helping me study for the CPA exam :) Amazingly helpful videos as always!
i'm a science major and was regretting signing up for a financial accounting class. but i feel so much better after i have found your videos. I literally supplement your videos with my textbook. I told all my classmates to find Edspira on youtube.. "how do you spell that" the videos are black with neon writing!! you can't miss it!
I'm so glad the videos are helping, and I appreciate you recommending my channel!
Short and simple. Thank you 🙏
Glad it was helpful!
i feel like your videos leave me with more questions than they answer, but its ok
I’m watching this video in order of your playlist and I watched the htm securities videos in prior. Can’t help but notice but how did the amortized cost and fair value of year 19 calculated? Was it given?
What is the journal entry when you sell a HTM before maturity date?
The difference between the calculation in vid 2 and this vid is in the state rate and yield rate, right?
Great review for cpa qualifications
In Lesson 1 of your "Accounting for Investments" playlist you said that AFS is no longer available for Equity Securities, yet this is Lesson 7 of that playlist and you're listing AFS as a possibility for Equities. How come?
Question - How did you calculate the "Fair Value" Column? Are we just assuming for simplification that at any given time this is the market price? I was able to observe that the market rate on 1/1/20 was 7.5753%.
I was just curious if you used this column as an example to show the differences of bond prices in given years from amortized cost?
I have the same doubt.. Were you able to figure it out?
And no one here is?
How were the figures in the F.V. column computed?
They are not computed, they are “given” and they get compared to the amortized cost. But it’s HTM, so it wouldn’t matter
amazingly beautiful
beautiful
How do we know the market rate , does it through the credit ratings ?
very beautiful
so beautiful
How fair value is decreasing can you show calculation for 1/1/20 ( how you came on 1037000)
How did you get the face value of $1,052,486 for 1st yr?
I was wondering the same thing.
I see you've been waiting 3 months for a reply...YIKES!!!
+o2c 5ft0 It is the present value of the face value of the bond plus the present value of the interest payments. I have several videos on valuing bonds and amortizing them if you would like to lean more.
Could you show the calculation i keep getting a different number
.....PV (1,000,000 * .81630) + PVOA (90,000*2.6432) = 1,054,188. I'm assuming our numbers are off because you rounded somewhere?
PV of face value (1,000,000 / (1+0,07)^3) + PV of interest payments (90,000*2,624) = 1,052,458 .. yeah, it is due to rounding. You get closer if you round the cumulative discount rate to 3 decimals, i.e. 2,624
Thanks a ton sir
I'm curious if you can explain how you would determine if a bond is impaired that is held to maturity. To my way of thinking, the key point would be to determine if the issuer was likely to default sometime over the next 12 months. Therefore, repayment (coupon and/ or principle) would not be made according to contractual terms. How would you measure impairment if that's the case?
1 million 52 thousand 486 thousand dollars? damn damn damn
Hi! When do you use Face Value + Premium and PV of Bond = PV of Face Value + PV of Interest Cash Flows? I'm quite confused.
When you are computing the value of a bond you take the PV of the interest payments plus the PV of the lump sum (the face value amount the borrower has to be repay at the end of the bond term). A premium exists when the bond pays an interest rate that exceeds the market interest rate at the time the bond is issued (investors are willing to pay more for such a bond because it pays interest at a higher rate than the market rate). Conversely, a discount exists when the bond pays an interest rate that is lower than the market interest rate at the time the bond is issued (the borrower must accept less cash than the face value of the bond to induce investors to buy the bond).
Edspira if i purchase held to maturity securities of five year at 100000 and receive 12000 as interest throughtout the year ..what will be the solution?