How to calculate the carrying value of a bond

The carrying value of a bond is that amount stated on the issuing entity's balance sheet. The carrying value of a bond is the combined total of its face value and any unamortized discounts or premiums. A discount from the face value of a bond occurs when investors want to earn a higher rate of interest than the rate paid by the bond, so they pay less than the face value of the bond. Conversely, a premium on the face value of a bond occurs when the interest rate paid by a bond is higher than the market rate, so investors are willing to pay more than the face value. These discounts are gradually amortized over the life of the bond, so that by the maturity date of a bond, its face value equals its carrying value.

When there is a discount from the face value of a bond, the remaining unamortized discount is subtracted from the face value to arrive at the carrying value.

When there is a premium on the carrying amount, the remaining unamortized premium is added to the face value of the bond to arrive at the carrying value.

Similar Terms

The carrying value of a bond is also known as its book value.