For the issuer of 20-year bonds, the amount of amortization using the effective interest method would decrease each year if the bonds are sold at a:
A) Option A
B) Option B
C) Option C
D) Option D

Question

For the issuer of 20-year bonds, the amount of amortization using the effective interest method would decrease each year if the bonds are sold at a: 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

According to the effective interest method, the amount of amortization decreases each year if the bonds are sold at a premium (higher than par value). Option A shows a premium price, therefore, the amount of amortization would decrease each year.

For the Issuer of 20-Year Bonds, the Amount of Amortization