If an issuer sells a bond at any other date than the interest payment date:
A)This means the bond sells at a premium
B)This means the bond sells at a discount
C)The issuing company will report a loss on the sale of the bond
D)The issuing company will report a gain on the sale of the bond
E)The buyer normally pays the issuer the purchase price plus any interest accrued since the prior interest payment date

Question

Quizplus · Accepted Answer

If an issuer sells a bond at any other date than the interest payment date, the buyer normally pays the issuer the purchase price plus any interest accrued since the prior interest payment date. This is because the bond has earned interest from the last payment date until the date of purchase, and the buyer needs to compensate the issuer for that accrued interest. This is known as the accrued interest and is normally added to the purchase price of the bond. Therefore, the bond is not sold at a premium or discount, and the issuing company does not report a gain or loss on the sale.

If an Issuer Sells a Bond at Any Other Date