The Result of Using the Effective Interest Method of Amortization

question 113

Multiple Choice

The result of using the effective interest method of amortization of discount on bonds is that the

• A)interest expense for each amortization period is constant.
• B)effective interest rate for each amortization period is constant.
• C)amount of interest expense decreases each period.
• D)cash interest payment is greater than the interest expense.

---

Definitions:

Above Average P/E Multiple

A valuation metric indicating that a company's current share price is higher relative to its per-share earnings than the industry or overall market average.

Risk-adjusted Equity Cost

A method of determining the cost of equity capital that incorporates the risk associated with the equity investment.

Price Earnings Ratio

A valuation metric that compares a company's share price to its per-share earnings, used to evaluate if a stock is over or under-valued.

Risk-adjusted Cost

A financial measure that adjusts the costs of an investment by considering the risk involved, accounting for the riskier nature of some investments compared to others.