If interest expense is less than the contractual interest payment, then
A)the note was issued at a premium.
B)the note was issued at a discount.
C)the note was issued at par.
D)the company should refinance the note to get a better interest rate.

Question

Quizplus · Accepted Answer

If interest expense is less than the contractual interest payment, it means the company is paying less interest than what is required by the terms of the note. This implies that the note was issued at a premium, where the company received more cash than the face value of the note, and hence is paying less interest on a relative basis.

If Interest Expense Is Less Than the Contractual Interest Payment