Cash interest is computed annually when a bond is issued for other than its face value.For a bond issued at a premium, how will this component change as the bond approaches maturity?
A) decrease
B) increase
C) remain constant
D) not enough information given to decide

Question

Quizplus · Accepted Answer

For a bond issued at a premium, the cash interest payment remains constant over the life of the bond. This is because the cash interest is determined by the bond's stated (or coupon) interest rate and its face value, both of which do not change over time.

Cash Interest Is Computed Annually When a Bond Is Issued