Practice Quiz

FRM Financial Risk Manager Practice Test

Category - Bond

Start a Study Session Sign up for Question of the Day
If Tom sells a bond before it matures, he will most likely catch the bond between coupon payment dates. Then what will he get?
  1. He will only get the principal value of the bond.
  2. He will only get the face value of the bond.
  3. He will get the price of the bond plus the accrued interest that the bond has earned up to the sale date.
  4. He will get the price of the bond pus the accrued interest that the bond earns until its maturity date.
Explanation
If he sells the bond, he is entitled to the price of the bond plus the accrued interest that the bond has earned up to the sale date.

Key Takeaway: Accrued interest is the interest that adds up each day between coupon payments. It guarantees Tom compensation for the period of time he has owned the bond.
Previous Next
Was this helpful? Upvote!
Login to contribute your own answer or details
Start a Study Session Sign up for Question of the Day

Top questions

Related questions

Most popular on PracticeQuiz