The sale of bonds above face value
A)is a rare occurrence.
B)will cause the total cost of borrowing to be less than the bond interest paid.
C)will cause the total cost of borrowing to be more than the bond interest paid.
D)will have no net effect on interest expense by the time the bonds mature.

Question

Quizplus · Accepted Answer

When bonds are sold above face value, the premium received reduces the total cost of borrowing, making it less than the bond interest paid over the life of the bond.

The Sale of Bonds Above Face Value