If Bonds Are Issued at a Premium, the Carrying Amount

question 132

True/False

If bonds are issued at a premium, the carrying amount of the bonds will be greater than the face amount of the bonds for all periods prior to the bond maturity date.

---

Definitions:

Individual Securities

are financial instruments such as stocks or bonds that are owned directly by investors, as opposed to being part of a pooled investment.

Weighted Average

A calculation method that multiplies each component by a factor reflecting its importance and sums these products to derive an average.

CAPM

The Capital Asset Pricing Model (CAPM) is a financial model that describes the relationship between systematic risk and expected return for assets, particularly stocks.

Expected Return

The weighted average of all possible returns for an investment, taking into account the likelihood of each outcome.