Bonds can be issued at par, premium, or discount, depending on the relationship between the stated interest rate and the market interest rate at the time of issuance. At Par: The bond’s stated interest rate is equal to the market interest rate. At a Discount: The bond’s stated interest rate is lower than the market rate, and the bond is issued at less than its face value. At a Premium: The bond’s stated interest rate is higher than the market rate, and the bond is issued for more than its face value. The discount or premium on bonds is amortized over the bond’s life using either: Straight-Line Method: Allocates equal amounts of premium/discount each period. Effective Interest Method: The preferred GAAP method, which allocates the premium/discount based on the carrying amount of the bond and the effective interest rate. Amortization of Discount increases interest expense over time, whereas Amortization of Premium decreases interest expense.