Which of the following statements regarding bond discounts or premiums is true?
A) discount on a bond reduces the amount that the issuer has to repay to the lenders.
B) premium on a bond increases the interest expense of the loan to the issuer.
C) premium on a bond increases the amount that the issuer has to repay to the lenders.
D) discount on a bond increases the interest expense of the loan to the issuer.

Question

Quizplus · Accepted Answer

A discount on a bond increases the interest expense because the issuer receives less cash than the face value but must repay the full face value at maturity, effectively increasing the cost of borrowing.

Which of the Following Statements Regarding Bond Discounts or Premiums