Under the effective interest method,the cash paid on each interest payment date will
A)decrease if bonds are issued at a premium.
B)increase if bonds are issued at a premium.
C)remain constant regardless of the issuance price.
D)increase if bonds are issued at a discount.

Question

Quizplus · Accepted Answer

The cash paid on each interest payment date remains constant regardless of whether the bonds are issued at a premium, discount, or at par value. This is because the cash interest payment is based on the bond's stated (or nominal) interest rate and its face value, not on its carrying amount.

Under the Effective Interest Method,the Cash Paid on Each Interest