SIE practice questionmediumAccrued Interest
When a bond transaction settles, the buyer pays which of the following in addition to the market price?
- AFuture interest payments
- BCall premium
- CAccrued interest✓ Correct answer
- DAnnual interest in advance
Explanation
Why C — Accrued interest
The buyer pays accrued interest for the period since the last interest payment. Future interest is received when due; call premiums are only paid if bonds are called; annual interest is not paid upfront.
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