Amortized Discount Is Computed Annually When a Bond Is Issued

question 181

Multiple Choice

Amortized discount is computed annually when a bond is issued for other than its face value.For a bond issued at a discount, how will this component change as the bond approaches maturity?

• A) decrease
• B) increase
• C) remain constant
• D) not enough information given to decide

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Definitions:

Linear Relationship

A type of relationship between two variables where a change in one variable is associated with a proportional change in the other variable.

API Gravity

A measure of the density of petroleum liquids relative to water, used in the petroleum industry to classify oils.

Coefficient Of Correlation

A quantitative analysis that measures the potency and vector of a linear correlation between two entities.

Positive Linear Relationship

A relationship between two variables where an increase in one variable is associated with an increase in the other variable, represented by a positive slope on a scatter plot.