Answer: D. Must accrue interest earned on the debt securities.
Debt securities can be defined as financial assets that designate their owner to a series of interest payments. Debt securities, as opposed to equity securities, mandate the debtor to pay back the principal lent. The interest rate on a debt security is largely determined by the debtor’s apparent trustworthiness.
Therefore, at the end of the timeframe of the payment, the owner of the debt securities is expected to accumulate the interest he has received from the borrower.