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Relationships The following components are computed annually when a bond is issued for other than its face value: Cash interest payment Interest expense Amortization of

Relationships

The following components are computed annually when a bond is issued for other than its face value:

Cash interest payment

Interest expense

Amortization of discount/premium

Carrying value of bond

Required:

State whether each component will increase, decrease, or remain constant as the bond approaches maturity given the following situations:

Status of Issuance Cash Interest Interest Expense Amortization Disc./Prem. Carrying Value
1. Issued at a discount _________________ _________________ _________________ _________________
2. Issued at a premium _________________ _________________ _________________ _________________

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