When bonds are issued at a discount,the total interest cost of the bonds over the life of the bonds is equal to the amount of the
A)interest payments made over the life of the bonds minus the amount of issuance discount.
B)issuance discount.
C)interest payments made over the life of the bonds plus the amount of issuance discount.
D)interest payments made over the life of the bonds.

Question

Quizplus · Accepted Answer

The total interest cost of bonds issued at a discount includes both the interest payments made over the life of the bonds and the amount of the issuance discount. This is because the discount increases the effective interest rate paid by the issuer beyond the stated rate on the bond.

When Bonds Are Issued at a Discount,the Total Interest Cost