Which of the following is correct? a. The terms, “yield rate”, “ stated rate”, and “market rate” are generally interchangeable when referring to interest on bonds. b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight-line method. c. Interest revenue and expense related to bonds are always computed using the stated rate of interest. d. If a bond is sold at its face amount, the stated and effective interest rates are the same.
Which of the following is correct? a. The terms, “yield rate”, “ stated rate”, and “market rate” are generally interchangeable when referring to interest on bonds. b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight-line method. c. Interest revenue and expense related to bonds are always computed using the stated rate of interest. d. If a bond is sold at its face amount, the stated and effective interest rates are the same.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Which of the following is correct?
a. The terms, “yield rate”, “ stated rate”, and “market rate” are generally interchangeable when referring to interest on bonds.
b. The yield or effective interest rate on a bond is equal to the stated rate if the bond premium or discount is amortized by using the straight-line method.
c. Interest revenue and expense related to bonds are always computed using the stated rate of interest.
d. If a bond is sold at its face amount, the stated and effective interest rates are the same.
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