The carrying value 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

For a bond issued at a discount, the carrying value increases as the bond approaches maturity. This is because the discount on the bond (the difference between its face value and the lower price at which it was issued) is amortized over the life of the bond, gradually increasing the carrying value of the bond to its face value at maturity.

The Carrying Value Is Computed Annually When a Bond Is