A Bond Pays Interest Semiannually on February 1 and August

question 60

Multiple Choice

A bond pays interest semiannually on February 1 and August 1. Assume today is October 1. How many months of accrued interest are included in the clean price of this bond?

• A)zero
• B)two
• C)three
• D)four
• E)five

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Definitions:

Deferred Tax Asset

An accounting term for items that can be used to reduce future tax liability when certain conditions are met, such as allowances for doubtful accounts.

Deferred Tax Liability

A tax obligation that arises from temporary differences between the book value and tax value of assets and liabilities, payable in future periods.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against an asset since it was acquired, reflecting its usage and wear and tear over time.

Tax Purposes

Considerations or actions undertaken in accounting or financial planning to minimize tax liabilities and comply with tax laws.