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Long-term finance

3.2 Debt finance definitions

JS issues 5% $100 debentures at a market value of $96. The
debenture is redeemable after 5 years at a premium of 10%.

Term Definition Equivalent from example

Par value Headline value of a $100
debenture

Coupon rate Minimum interest repayment 5% × $100 = $5 interest
per annum based on par repayment each year (in cash)
values

Market value Cash received from issuing $96
loan

Redemption date Date of repayment of capital 5 years
element of loan

Premium Extra amount repayable at $10
redemption date based on
par values 10% premium on par value of
$100 = repayment of $110
(premium of $10)

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