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Quiz_7 _ Key - ACC 5110 Name Part I Choose the best answer...

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ACC 5110 Winter 2010 QUIZ 7 Name : KEY Part I. Choose the best answer. 1. Which of the following is correct about the effective-interest method of amortization? a. The effective interest method applied to investments in debt securities is different from that applied to bonds payable. b. Amortization of a discount decreases from period to period. c. Amortization of a premium decreases from period to period. d. The effective-interest method produces a constant rate of return on the book value of the investment from period to period. - Rate of return = Interest revenue / Carrying value of investment assets - Under the effective-interest method, amount of amortization is increasing for both discount- and premium-issuance. 2. Which of the following is not correct in regard to trading securities?
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