The effective interest method of amortization keeps each interest expense amount at the same percentage of the bond's carrying value for every interest payment over the bond's life.

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The effective interest method of amortization ensures that the interest expense amount remains at the same percentage of the bond's carrying value for every interest payment over the bond's life. This is achieved by adjusting the carrying value of the bond each period to reflect the interest expense and the amortization of any discount or premium. As a result, the interest expense will decrease over time as the bond's carrying value approaches its face value at maturity.

The Effective Interest Method of Amortization Keeps Each Interest Expense