A bond issued at a discount will pay more cash for interest over the life of the bond than the total interest expense recognized over the life of the bond.

Question

Quizplus · Accepted Answer

A bond issued at a discount means that the initial price of the bond is less than the face value. The interest expense recognized over the life of the bond is calculated based on the face value of the bond, not the discounted price. Therefore, the total interest expense recognized over the life of the bond will be higher than the cash paid for interest.

A Bond Issued at a Discount Will Pay More Cash