Asked by Alexandra Kostanyan on May 25, 2024
Verified
Two methods of amortization of a discount or premium are used by businesses.These two methods are the effective interest method and the straight-line method.
Required:
Effective Interest Method
A technique used in finance to calculate the actual interest rate on a bond or loan, considering compounding over the term.
Straight-Line Method
A method of calculating depreciation by evenly distributing the cost of an asset over its expected useful life.
Premium
The amount paid for insurance coverage or the amount above the nominal value in finance.
- Identify and explain the two main methods of amortization of bond discounts and premiums.
Verified Answer
JB
Learning Objectives
- Identify and explain the two main methods of amortization of bond discounts and premiums.