When a bond is purchased in the secondary bond market at a discount, the amount of discount treated as interest income when the bond is sold prior to maturity is the:
A) accrued market discount.
B) market premium.
C) market discount.
D) accrued market premium.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

When a bond is purchased in the secondary bond market at a discount, the difference between the purchase price and the face value of the bond is considered market discount. This market discount is treated as interest income when the bond is sold prior to maturity, and the amount of discount to be treated as interest income is referred to as accrued market discount.

When a Bond Is Purchased in the Secondary Bond Market