Question: A corporation issues $15,000,000, 12%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 11%. The straight line method

A corporation issues $15,000,000, 12%, 20-year bonds, interest payable annually, at a time when the market rate of interest is 11%. The straight line method is adopted for the amortization of a bond premium. Which of the following statements is true?

A. The amount of the annual interest expense increases as the bond approaches maturity.

B. The amount of the annual interest expense decreases as the bond approaches maturity.

C. The amount of the annual interest paid to bondholders declines over the 20-year life of the bonds.

D. The carrying value decreases from its amount at issuance date to $15,000,000 at maturity.

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