When the interest payment dates of a bond are May 31 and November 30,and a bond issue is sold on July 1,the amount of cash received by the issuer will be:

Question

Quizplus · Accepted Answer

When a bond is issued, the purchaser pays a price that includes accrued interest up to the bond issue date. In this case, the bond was issued on July 1, which is after the May 31 interest payment date. Therefore, the issuer is entitled to the interest earned from May 31 to July 1, which is the accrued interest. This means that the issuer will receive an increased cash amount, as it will include the accrued interest from May 31 to July 1. Hence, the correct answer is C, "Increased by accrued interest from May 31 to July 1."

When the Interest Payment Dates of a Bond Are May