Question

Accrued interest.....

a) is quoted in the bond price in the financial press and must be paid by the buyer of the bond to the seller of the bond.

b) is NOT quoted in the bond price in the financial press and must be paid by the buyer of the bond to the seller of the bond.

c) is quoted in the bond price in the financial press and must be paid by the buyer of the bond to the broker for the inconvenience of selling bonds between maturity dates.

d) is NOT quoted in the bond price in the financial press and must be paid by the buyer of the bond to the broker for the inconvenience of selling bonds between maturity dates.

e) none of the above

Answer 1

Answer B is correct

Accrued Interest is the interest on the bond from the date of last payment of interest till the date of sale of bond. For e.g. If bond pay interest at 30 June and 31 Dec and bond holder wants to sell the bond at 30 sep, the interest from 1 july to 30 sep will be considered as accrued interest. In that case bond seller will receive the accrued interest from the bond buyer as the Bond buyer will going to receive the full interest at the interest date. And accrued interest is never quoted in the bond price. Therefore Answer B is correct.