When a company issues a bond at a discount:
A)the company will pay less than the face amount of the bond at its maturity.
B)the company will pay more than the face amount of the bond at its maturity.
C)the company's interest expense will be less than the interest paid each year.
D)the company's interest expense will be more than the interest paid each year.

Question

Quizplus · Accepted Answer

When a bond is issued at a discount, the company receives less than the face value initially but must pay the full face value at maturity. The difference between the issue price and the face value is amortized as additional interest expense over the life of the bond, making the interest expense greater than the actual interest paid.

When a Company Issues a Bond at a Discount