a) actual amount of interest paid
b) book value of the bonds multiplied by the stated interest rate
c) book value of the bonds multiplied by the effective interest rate
d) maturity value of the bonds multiplied by the effective interest rate
2006-10-26 06:02:13 · 3 answers · asked by sweetnsexy_38 2 in Business & Finance ➔ Other - Business & Finance
The correct answer is c) book value of the bonds multiplied by the effective interest rate.
The amount of amortization of the bond discount/premium is calculated as the difference between the effective interest expense for the period and the accrued nominal interest. As the carrying amount changes each period by the amount of amortized discount/premium, interest expense either increases (for discounts) or decreases (for premiums) over the life of the bonds. The principal, coincidentally, also fluctuates as the interest expense increase and decreases.
2006-10-26 06:15:50 · answer #1 · answered by R.T.D. 2 · 0⤊ 0⤋
The Effective Interest Amortization Method
2016-11-15 09:00:39 · answer #2 · answered by kise 4 · 0⤊ 0⤋
c) book value of the bonds multiplied by the effective interest rate
2006-10-26 06:16:11 · answer #3 · answered by Anonymous · 0⤊ 0⤋