Question

In classifying investments, how do held-to-maturity securities differ from other marketable securities?

	A.	The investor has the ability to control the investee.
	B.	The investor plans to hold the securities until they mature.
	C.	The investor has the ability to exercise significant influence over management of the investee.
	D.	These securities have a high degree of liquidity.

Answer 1

Answer is Option B. The investor plans to hold the securities until they mature

Held to maturity securities are the securities which management intends to hold until they are matured. This type of security is recorded at cost on financial statements of the company. The temporary fluctuations in price do not affect the reporting of the value of held to maturity securities. The interest income of these securities is recognised in Income statement. These securities are reported under the Long term investments in the Balance sheet of the Investor. Marketable securities are the securities which are held with short term intention and to sell them immediately and gain from it. They are reported as part of current assets.