Interest expense will be less than the interest payment when bonds are issued at:

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When bonds are issued at a premium, the interest expense (calculated using the effective interest rate method) is less than the actual interest payment because the premium effectively reduces the cost of borrowing over the life of the bond. This is because the premium received when the bond is issued is amortized over the life of the bond, reducing the amount of interest expense recognized in each period.

Interest Expense Will Be Less Than the Interest Payment When