When the interest payment dates of a bond are May 31 and November 30, and a bond issue is sold on July 1, the amount of cash received by the issuer will be:
A)Increased by accrued interest from May 31 to July 1.
B)Decreased by accrued interest from July 1 to November 30.
C)Unaffected by accrued interest.
D)Increased by accrued interest from July 1 to November 30.
E)Decreased by accrued interest from May 31 to July 1.

Question

Quizplus · Accepted Answer

The issuer receives additional cash for the accrued interest from the last interest payment date (May 31) to the sale date (July 1), as the buyer compensates the issuer for interest earned during this period.

When the Interest Payment Dates of a Bond Are May