An investor purchased a bond as a long-term investment on January 1. Annual interest was received on December 31. The investor's interest income for the year would be lowest if the bond was purchased at

Question

Quizplus · Accepted Answer

Purchasing a bond at a premium means the investor pays more than the face value of the bond. The interest income is effectively reduced by the amortization of the premium paid over the life of the bond, leading to the lowest interest income compared to purchasing at a discount, par, or face value, where the interest income would not be reduced in this manner.

An Investor Purchased a Bond as a Long-Term Investment on January