Interest expense will be greater than the interest payment when bonds are issued at:

Question

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When bonds are issued at a discount, the interest expense will be greater than the interest payment because the effective interest rate will be higher than the contract rate. This is because the company receives less cash upfront than the face value of the bond, and must therefore make up for it by paying a higher effective interest rate over the life of the bond.

Interest Expense Will Be Greater Than the Interest Payment When