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Question:

Under the effective interest method, a company that issues zero-coupon bonds will least likely report:

A A decrease in its debt‐to‐assets ratio each year over the term of the bonds.
Explaination

A company that issues zero-coupon bonds basically issues them at a deep discount to par. The book value of the liability increases each year over the term and approaches the bonds’ par value. Therefore, the company’s reported debt‐to‐assets ratio will increase each year.