The effective interest method of amortization of bond premiums and discounts is superior to the straight-line method because it results in a(n)
A)more variable interest rate.
B)uniform rate of interest.
C)interest rate that increases or decreases slightly over time.
D)interest rate that is close to the market interest rate.

Question

Quizplus · Accepted Answer

The effective interest method results in a uniform rate of interest over the life of the bond, aligning the interest expense with the carrying amount of the bond, which reflects the market rate at issuance.

The Effective Interest Method of Amortization of Bond Premiums and Discounts