Which Is the Preferred Method to Use When Amortizing a Bond

question 30

Multiple Choice

Which is the preferred method to use when amortizing a bond discount or premium?

• A)Straight- line method of amortization
• B)Market- interest rate method of amortization
• C)Effective interest method of amortization
• D)Both straight- line and market- interest rate methods of amortization are equally preferable

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Definitions:

Sales

The total amount of revenue generated from the sale of goods or services by a company.

Net Present Value Method

A financial analysis tool used to evaluate the profitability of an investment by determining the present value of expected future cash flows.

Working Capital

The difference between a company's current assets and its current liabilities, indicating short-term financial health.

Discount Rate

The interest rate used to discount future cash flows to their present value, often utilized in determining an investment's worth.