Which of the Following Is Correct About the Effective-Interest Method

question 15

Multiple Choice

Which of the following is correct about the effective-interest method of amortization?

• A) The effective-interest method applied to investments in debt securities is different from that applied to bonds payable.
• B) Amortization of a discount decreases from period to period.
• C) Amortization of a premium decreases from period to period.
• D) The effective-interest method produces a constant rate of return on the book value of the investment from period to period.

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Definitions:

T-test for Dependent Means

A statistical method used to compare the means of two related groups.

α

In statistics, α (alpha) typically represents the level of significance, the probability of rejecting the null hypothesis when it is actually true.

Null Hypothesis

A hypothesis that assumes no statistical significance exists in a set of given observations and that any observed difference is due to chance.

T = 1.965

A specific value often used in statistical analysis, particularly in hypothesis testing, where it represents a critical value in a t-distribution.