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:

Question

Quizplus · Accepted Answer

When a bond is purchased in the secondary market at a discount, the amount of discount is considered a market discount. If the bond is sold prior to maturity, the bondholder must recognize the market discount as taxable interest income. This market discount is treated as an accrued market discount. Therefore, the correct answer is D.

When a Bond Is Purchased in the Secondary Bond Market