If a bond sells at a discount, the amortization of the discount will:
A)increase the interest expense.
B)decrease the interest expense.
C)increase the cash payment for interest.
D)have no effect on the interest expense.

Question

Quizplus · Accepted Answer

When a bond sells at a discount, it means that the bond's price is lower than its face value, resulting in a lower interest rate than the market rate. To compensate for this lower interest rate, the discount is amortized over the bond's life, which increases the interest expense. Therefore, choice A is the correct answer.

If a Bond Sells at a Discount, the Amortization of the Discount