A company invests in a 5-year debt security and classifies it as HTM. Market rates of interest for this type of investment decline while the company holds the security.
Which statement is true?

Question

Quizplus · Accepted Answer

When market rates decline, the market value of the debt security increases. However, since the security is classified as Held-to-Maturity (HTM), it is reported at amortized cost on the balance sheet, which would be lower than the increased market value.

A Company Invests in a 5-Year Debt Security and Classifies