An Asset (Not an Automobile) Placed in Service in June

question 32

Multiple Choice

An asset (not an automobile) placed in service in June 2015 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming bonus depreciation is extended into 2015, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2015?​

• A)​$7,000
• B)​$17,500
• C)​$21,000
• D)​$24,500
• E)​$35,000

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Definitions:

Effective Maturity

The average time until a bond is repaid, considering possible calls or prepayments, which might alter the time frame for return on investment.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, often used in financial analyses to find an average value wherein each data point can carry a different weight.

Convexity

A measure of the curvature in the relationship between bond prices and yield, indicating how the duration of a bond changes as interest rates change.

Duration Predictions

Predictions about the length of time it will take for the price of a bond to be repaid by its internal cash flows.