The Result of an Effective Interest Rate That Is Higher

Multiple Choice

The result of an effective interest rate that is higher than the stated rate on a debt security is the:

A) Carrying value of the debt will decrease each interest period.
B) Dollar amount of interest expense reported on the income statement, assuming the interest method is used, will increase each interest period.
C) Cash interest paid on each interest date will be changed.
D) Security will sell at a premium.