Question

When bonds are sold at a discount between interest dates, the buyer

A-pays no interest to the issuer

B-pays the issuer interest from the date on the bonds to the purchase date

C-receives the interest from the issuer from the date on the bonds to the purchase date

D-receives a discount from the issuer for the loss of the interest before purchase

What is the correct answer?

Answer 1

Answer :-

The Correct Answer is Option B - pays the issuer interest from the date on the bonds to the purchase date

Explanation :-

On Interest date , the buyer received Interest for the entire period of Bond. But the whole Interest is not belong to the buyer . In this Interest there is some share of the issuer which buyer have to pay it.

So the first Option A is incorrect as the buyer has to pays Interest to issuer as the Issuer hold the Bond from the date on the bonds to the purchase date of the buyer. So the Correct Answer is Option B.

When bonds are sold at a discount between interest dates, the buyer pays the issuer interest from the date on the bonds to the purchase date.

On the date of Interest received , buyer of Bond would receive whole Interest from that Bond . So buyer has to pay the interest to the issuer for his share not the buyer will receive the interest from the issuer . So the Option C is not correct answer.

Bond are sold at a discount but there is no loss of interest. Interest will received on the interest date . So the Option D is also incorrect as given that receives a discount from the issuer for the loss of the interest before purchase.