Monica Buys a Bond for $750 and Then Sells It

question 54

Multiple Choice

Monica buys a bond for $750 and then sells it later for $950. What type of gain is Monica's experience?

• A) a net gain
• B) a real interest gain
• C) a capital gain
• D) an inflation tax gain

Analyze the historical context and effects of specific price controls, such as those on gasoline.

Understand the rationale and effects of rent control policies.

Comprehend how taxes and removal of taxes affect market prices and equilibrium.

Understand the concepts and purposes behind rent control and the minimum wage.

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Definitions:

Market Interest Rate

The prevailing rate of interest available in the market for securities of similar risk and maturity.

Effective Interest Rate

The actual return on investment or cost of a loan, taking into account the compounding of interest, as opposed to the nominal rate.

Stated Interest Rate

The annual interest rate declared on a loan or investment, not taking into account compounding or fees.

Premium Amortized

The process of gradually writing off the initial cost of a premium over the period of the bond to match it with the interest earned.