Jerry and Ann Paid the Following Amounts During 2013: Interest $\$ 1,500$

question 46

Multiple Choice

Jerry and Ann paid the following amounts during 2013: Interest on automobile
loan
$\$ 1,500$
Interest on bank loan (proceeds were used to purchase
municipal
bonds)
$\$ 5,000$ Qualified home mortgage
interest
$\$ 3,000$ What is the maximum amount they can use as interest expense in calculating itemized deductions for 2013?

• A)$3,000
• B)$3,150
• C)$4,500
• D)$8,000
• E)None of the above

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Definitions:

Yield To Maturity

The expected rate of return on a bond if held until its maturity date, reflecting both interest payments and any gain or loss if the bond was purchased at a discount or premium.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuer's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.

Coupon Rates

The interest rate stated on a bond when issued, which represents the annual interest payment divided by the bond's face value.

Coupon Interest Rate

The rate at which a bond issuer agrees to pay interest to the bondholders, usually expressed as an annual percentage of the face value of the bond.