When long-term investments in bonds are sold before their maturity date, the seller deducts any accrued interest since the last interest payment date from the selling price.
A.True
B.False
True
To determine whether the statement is true or false, we need to evaluate the concept being discussed - the deducting of accrued interest when selling long-term bonds before their maturity date.
Accrued interest refers to the interest that has accumulated on a bond since its last interest payment date. When a bondholder decides to sell their long-term bond before it reaches its maturity date, they may need to adjust the selling price based on the accrued interest.
The adjustment of the selling price to deduct the accrued interest depends on the market convention and the agreement between the buyer and the seller. In some cases, the seller may deduct the accrued interest from the selling price, while in other cases, the interest may be included in the selling price. It ultimately depends on the terms agreed upon by the parties involved in the transaction.
Therefore, the statement is not universally true. The correct answer is B. False. The deduction of accrued interest from the selling price is not always applicable when long-term investments in bonds are sold before their maturity date.