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A bond is a written guarantee or promise to pay a certain amount as the par value of the bond along with interest at an annual interest rate. Thus, a bond is considered as a short or long term liability for a corporation. If the bond repayment period is greater than 1 year, it is considered as a long term liability; however if the maturity date is within 1 year, the bond is considered a short-term liability.

The par value or face value of the bond is repaid back at a specified future date, also known as the maturity date. The total amount of interest paid each year is calculated by multiplying the face value of the bond x stated annual interest rate (also known as the contract rate or nominal rate/ coupon rate).

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