Cash interest payment is computed annually when a bond is issued for other than its face value.For a bond issued at a discount, how will this component change as the bond approaches maturity?
A) decrease
B) increase
C) remain constant
D) not enough information given to decide

Question

Quizplus · Accepted Answer

Cash interest payments on a bond remain constant throughout the life of the bond, regardless of whether it is issued at a discount, at par, or at a premium. The cash interest payment is determined by the bond's coupon rate and its face value, neither of which changes over time.

Cash Interest Payment Is Computed Annually When a Bond Is