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 bond market at a discount, the bond is sold prior to maturity, and the amount of discount treated as interest income, it is called accrued market discount. Therefore, option D is the correct answer. The market premium (option A) is the price at which a bond is trading above its face value, whereas the market discount (option B) is the price at which a bond is trading below its face value. Accrued market premium (option C) is not relevant to bonds bought at a discount.

When a Bond Is Purchased in the Secondary Bond Market