When is interest expense more than interest paid?
A) when bonds are sold at a premium
B) when bonds are sold at a margin
C) when bonds are sold at a discount
D) when bonds are sold at a yield

Question

Quizplus · Accepted Answer

When bonds are sold at a discount, the issuer receives less money upfront than the face value of the bonds. Over the life of the bonds, the issuer must not only pay interest but also amortize the discount, which increases the total interest expense beyond the cash interest paid.

When Is Interest Expense More Than Interest Paid