All of the Following Are True for Available-For-Sale Debt Securities

question 37

Multiple Choice

All of the following are true for available-for-sale debt securities except for:

• A)Recorded at cost when acquired.
• B)Earn interest that is reported in the income statement.
• C)Classified as either short-term or long-term securities.
• D)Reported at fair value on the balance sheet.
• E)Actively managed like Trading Securities.

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Definitions:

Interest Payments

Regular payments made to lenders or bondholders as compensation for the use of borrowed funds, usually calculated as a percentage of the principal.

Nominal Rate

The stated interest rate of a financial product, not adjusted for inflation, which represents the rate before taking into account the compounding period.

Simple Interest

Interest calculated solely on the principal amount of a loan or deposit, over a particular time period.

Effective Annual Rates

The real return on an investment, taking into account the effect of compounding interest over multiple periods within a year.