Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
If you are holding a premium bond, you must expect a each year until maturity
If you are holding a premium bond, you must expect a each year until maturity. If you are holding a discount bond, you must expect a each year until maturity. (In each case assume that the yield to maturity remains stable over time.) A) capital gain; capital loss B) capital gain; capital gain C capital loss; capital gain D) capital loss; capital loss
Expert Solution
- If you are holding a Premium Bond which means Price of Bond is higher than its par value. And the Yield to maturity of bond remains stable over time.
Since Yield remains stable the Price of Premium Bond which decrease each year to reach Par value at maturity date as Bond's are redeemed at par value on Maturity date.
Decrease in Price each year will result in capital loss.
- Vice-Versa will happend for discound Bond.
If you are holding a Discount Bond which means Price of Bond is Lower than its par value. And the Yield to maturity of bond remains stable over time.
Since Yield remains stable the Price of Discount Bond which Increase each year to reach Par value at maturity date as Bond's are redeemed at par value on Maturity date.
Increase in Price each year will result in capital gain.
hence, option C
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
