Question

The annual interest payment on bonds: decreases over the life of the bonds when bonds are issued at a discount. stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium. increases over the life of the bonds when bonds are issued at a discount. increases over the life of the bonds under the effective-interest method, but stays constant under the straight-line method of amortization.

Answer 1

Answer:

stays constant over the life of the bonds, regardless of whether bonds are issued at par, a discount, or a premium.

Explanation:

The Annual Interest payment is calculated as follow

Annual Interest payment = Face value x Coupon rate

The Face value and coupon rate remain the same because these are constant values.

The interest payment is independent of the price of the bond. Whether the bond is issued on premium or on discount, the interest payment remains the same