For the Issuer of 20-Year Bonds, the Carrying Value Using

question 46

Multiple Choice

For the issuer of 20-year bonds, the carrying value using the effective interest method would decrease each year if the bonds were sold at a: $$\begin{array}{l}\text { }\\\begin{array} { c c c } &\text { Discount } & \text { Premium } \\\hline a.&\text { No } & \text { No } \\b.&\text { No } & \text { Yes } \\c.&\text { Yes } & \text { Yes } \\d.&\text { Yes } & \text { No }\end{array}\end{array}$$

• A) Option a
• B) Option b
• C) Option c
• D) Option d

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Definitions:

Contract

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

Equivalent Payments

Alternative payments that will result in the same future value at a later date.

Obligation

A duty or commitment to fulfil an act, usually as part of a contract or by law, such as the repayment of a loan.

Equal Payments

A series of identical payments made over a set period, commonly used in loans and installment purchases.