Reference no: EM132959414

Problem 1:  Which of the following is true with regards to the accrued interest on investment in debt securities that are sold between interest dates?

a. The accrued interest is computed using the effective rate

b. The accrued interest will be paid to the seller when the bonds mature

c. The accrued interest is extra income to the buyer and treated as bond issue cost of the buyer

d. The accrued interest is added to the issue price of the bond to determine the total cash payments from bond acquisition

Problem 2: If a bond investment is purchased between interest payment dates, the buyer should pay, in addition to the purchase price of the bonds, the amount of accrued interest computed

a. From the date of acquisition to the nearest interest payment date

b. From the last interest payment date to the date of acquisition

c. From the last interest payment date to the next interest payment date

d. None of the above