Under the Effective-Interest Method of Amortization, the Amount of Discount

question 15

Multiple Choice

Under the effective-interest method of amortization, the amount of discount amortized each interest period is equal to the:

• A)total amount of interest expense, divided by the number of interest payments to be paid.
• B)total discount, divided by the number of interest payments to be made.
• C)amount of interest expense plus the cash paid.
• D)amount of interest expense less the cash paid.

---

Definitions:

Budget Line

An illustration showing all the different pairs of two items that a buyer can afford, considering their financial resources and the pricing of such goods.

Expected Rate

In finance, it refers to the return anticipated on an investment or the interest rate at which money is borrowed or lent.

Risk-Free Asset

An investment that is expected to deliver guaranteed returns with no risk of financial loss.

Expected Rate

A projection or estimate of the rate of return on an investment or the growth rate of an economic variable in the future.