The Result of an Effective Interest Rate That Is Higher

question 43

Multiple Choice

The result of an effective interest rate that is higher than the stated rate on a debt security is the:

• A)Carrying value of the debt will decrease each interest period.
• B)Dollar amount of interest expense reported on the income statement, assuming the interest method is used, will increase each interest period.
• C)Cash interest paid on each interest date will be changed.
• D)Security will sell at a premium.

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Definitions:

Waiting Period

A mandatory interval of time between the initiation of an action and its actual application, such as between filing an insurance claim and receiving benefits.

Filing Date

The filing date refers to the specific day on which a document is officially submitted or recorded with a governmental or legal office.

Effective Date

The date on which an agreement, policy, or regulation becomes enforceable or active.

Securities Act Of 1933

A U.S. federal law enacted to ensure transparency and fairness in the issuance of securities, requiring registration and disclosure to protect investors.