When the Straight-Line Method of Amortization Is Used for a Bond

question 19

Multiple Choice

When the straight-line method of amortization is used for a bond premium, the amount of interest expense for an interest period is calculated by

• A)adding the amount of premium amortized for that period to the amount of cash paid for interest during the period.
• B)subtracting the amount of premium amortized for that period from the amount of cash paid for interest during the period.
• C)multiplying the face value of the bonds by the stated interest rate.
• D)multiplying the face value of the bonds by the market interest rate.

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Definitions:

Portfolio

A group of investment assets held by either a person or a corporate entity.

Stock Y

A placeholder name typically used to represent a generic or hypothetical stock or equity investment in examples or discussions.

Beta

A measure of a stock's volatility in relation to the overall market; indicating how much a stock’s price might swing.

Portfolio

An assortment of financial assets comprising stocks, bonds, commodities, alongside cash and cash equivalents, as well as closed-end funds and exchange traded funds (ETFs).