Original issue discount is amortized over the life of the bond.

Question

Quizplus · Accepted Answer

Original issue discount represents the difference between the face value of a bond and the price at which it is initially sold. This discount is amortized over the life of the bond, which means that it is gradually deducted from the bond's book value as time passes. This amortization process reduces interest expense for the issuer and reflects the true cost of borrowing for the investor. Therefore, the statement is true.

Original Issue Discount Is Amortized Over the Life of the Bond