Which of the following statements about bond premiums or discounts is correct?
A)A discount on a bond reduces the amount that the issuer has to repay to the lenders.
B)A premium on a bond increases the interest expense of the loan to the issuer.
C)A premium on a bond increases the amount that the issuer has to repay to the lenders.
D)A discount on a bond increases the interest expense of the loan to the issuer.

Question

Quizplus · Accepted Answer

If a bond is sold at a discount,the interest expense to the issuer is higher than the amount of periodic interest paid;it equals the cash interest payments plus the amount of the discount.If a bond is sold at a premium,the interest expense to the issuer is lower than the amount of periodic interest paid;it equals the cash interest payments minus the amount of the discount.

Which of the Following Statements About Bond Premiums or Discounts