The cash interest payment is computed annually when a bond is issued for other than its face value.For a bond issued at a discount,how will this component change as the bond approaches maturity?
A)Decrease
B)Increase
C)Remain constant
D)Not enough information given to decide

Question

Quizplus · Accepted Answer

The cash interest payment on a bond is determined by its coupon rate and face value, both of which remain constant from issuance to maturity. Therefore, even if a bond is issued at a discount, the actual cash interest payments do not change as the bond approaches maturity.

The Cash Interest Payment Is Computed Annually When a Bond