Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

Securities that are classified as "held-to-maturity" are intended to be held until they reach their maturity date, at which point the investor receives the principal amount back. This classification reflects the management’s intention to hold the securities until they mature, rather than selling them in the market at any point during their life.

The correct choice states that these securities are recorded on the balance sheet at amortized cost. This means that they are valued based on the initial purchase price adjusted for amortization of premiums or discounts over time. This approach differs from other types of securities, such as those that are held for trading or available for sale, which are typically marked-to-market. The amortized cost method helps give a more stable view of the asset on the financial statements, aligning with the intent to hold these securities until maturity.

The option that mentions trading account securities would not apply here since those are primarily intended for short-term buying and selling, and thus are recorded differently. Mark-to-market accounting is also relevant for other categories of securities, but not for those held-to-maturity, further supporting why the alternative options are not applicable here.