Which of the Following Events Involves an Accrual

question 70

Multiple Choice

Which of the following events involves an accrual?

• A) a cash payment received from a customer before services are provided
• B) supplies purchased with cash but not yet used
• C) interest earned but not received
• D) A and C

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Definitions:

Par-Value

The face value of a bond or stock, representing the amount that the issuer agrees to repay at maturity or the nominal value of a share, respectively.

Duration

A measure of the sensitivity of a bond's price to changes in interest rates, essentially a weighted average of the time until cash flows are received.

Coupon Bond

A type of bond that pays the holder a fixed interest payment (coupon) at regular intervals until the maturity date, when the principal amount is repaid.

Maturity

The expiration date of a financial instrument, at which point the principal (and all remaining interest) is due to be paid.