An Amortized Premium Is Computed Annually When a Bond Is

question 131

Multiple Choice

An amortized premium is computed annually when a bond is issued for other than its face value.For a bond issued at a premium,how will this component change under the effective interest method as the bond approaches maturity?

• A)Decrease
• B)Increase
• C)Remain constant
• D)Not enough information given to decide

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Definitions:

Conform

To act in accordance or harmony with established standards, rules, or laws.

Contract

A legally binding agreement between two or more parties that outlines obligations and rights.

Boilerplate

Standardized text, typically in contracts or legal documents, used repeatedly without significant change.

Framework Agreement

A long-term agreement with suppliers that sets out terms and conditions under which specific purchases (calls-offs) can be made throughout the term.