When bonds are issued at a premium,the total interest cost of the bonds over the life of the bonds is equal to the amount of
A) interest payments made over the life of the bonds minus the amount of issuance premium.
B) issuance premium.
C) interest payments made over the life of the bonds plus the amount of issuance premium.
D) interest payments made over the life of the bonds.

Question

Quizplus · Accepted Answer

When bonds are issued at a premium, the interest payments made over the life of the bonds are less than the face value of the bonds. The difference between the face value and the issue price is the premium. As a result, the interest cost of the bonds over their life is equal to the interest payments made minus the amount of issuance premium, as stated in option A.

When Bonds Are Issued at a Premium,the Total Interest Cost