Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
The current income is ?
The investor would experience a Gain, Loss, or Neither?
The total
$?
![**Bond Investment Analysis:**
An investor buys a bond for $5,000. The bond pays $220 interest every six months. After 18 months, the investor sells the bond for $4,939. Describe the types of income and/or loss the investor had.
1. **Current Income:**
The current income is \$\[ \] (Round to the nearest dollar).
2. **Capital Gain/Loss:**
The investor would experience a \[v\] in the amount of \$\[ \] (Choose from the drop-down menu and enter a loss as a negative number rounded to the nearest dollar).
3. **Total Return:**
The total return on this investment is \$\[ \] (Round to the nearest dollar).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F04b75ea7-69f8-44f3-a33a-ba23330f1240%2F0daaceca-a2e4-4e89-88c6-927ec5820662%2Fce9s9op_processed.png&w=3840&q=75)
Transcribed Image Text:**Bond Investment Analysis:**
An investor buys a bond for $5,000. The bond pays $220 interest every six months. After 18 months, the investor sells the bond for $4,939. Describe the types of income and/or loss the investor had.
1. **Current Income:**
The current income is \$\[ \] (Round to the nearest dollar).
2. **Capital Gain/Loss:**
The investor would experience a \[v\] in the amount of \$\[ \] (Choose from the drop-down menu and enter a loss as a negative number rounded to the nearest dollar).
3. **Total Return:**
The total return on this investment is \$\[ \] (Round to the nearest dollar).
Expert Solution
Step 1: Introduction
A bond refers to the instrument which obligates the issuer to pay pre-defined interest to the buyer. The face value of the bond is its par value and it is mentioned on the bond document. Bonds are generally issued in the denomination of $100, $1000 and so forth. The value of the bond is repaid at the end of maturity period. The specific rate of interest payable on a bond is called its coupon rate. Mostly the interest payments of bonds are fixed till maturity period.
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