Which of the following statements is true?
A)If a bond is sold "at a discount," the effective interest rate on the bond is lower than the stated interest rate.
B)Bond price of 98 means that the yield rate is 98% of the stated rate.
C)If a bond is sold "at a premium," the effective interest rate on the bond is higher than the stated interest rate.
D)If a bond is sold between interest dates, it is necessary to record the interest accrued since the last payment date before sale.

Question

Quizplus · Accepted Answer

When a bond is sold between interest payment dates, the seller is entitled to the interest earned from the last interest payment date up to the sale date. Therefore, it is necessary to record the accrued interest to ensure the seller receives the correct amount of interest income, and the buyer compensates the seller for the interest accrued up until the purchase date.

Which of the Following Statements Is True