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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
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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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