Using the Effective Interest Rate Method to Amortize Bond Premium

question 37

Multiple Choice

Using the effective interest rate method to amortize bond premium will

• A) cause the carrying value of the bond to increase as it approaches the maturity date.
• B) cause the carrying value of the bond to decrease as it approaches the maturity date.
• C) cause the carrying value to be the same as the issue price.
• D) not change the carrying value.

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Definitions:

Marginal Expenditure Curve

A graphical representation that shows the change in total expenditure incurred by purchasing one additional unit of a good or service.

Economic Rent

Amount that firms are willing to pay for an input less the minimum amount necessary to obtain it.

Factor Of Production

Resources used in the creation of goods and services, typically categorized into land, labor, capital, and sometimes entrepreneurship.

Supply Curve

A graphical representation of the relationship between the price of a good and the quantity supplied.