Karen Owns City of Richmond Bonds with a Face Value

question 283

Multiple Choice

Karen owns City of Richmond bonds with a face value of $10,000. She purchased the bonds on January 1, 2018, for $11,000. The maturity date is December 31, 2027. The annual interest rate is 4%. What is the amount of taxable interest income that Karen should report for 2018, and the adjusted basis for the bonds at the end of 2018, assuming straight-line amortization is appropriate?

• A) $0 and $11,000
• B) $0 and $10,900
• C) $100 and $11,000
• D) $100 and $10,900
• E) None of the above

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Definitions:

Independent Events

Multiple events where the happening of one does not influence the likelihood of the other events happening.

P(A ∩ B)

P(A ∩ B) denotes the probability of the intersection of events A and B, meaning the probability that both A and B occur.

Occurrence

An event or incident that happens or takes place.

Experiment

A scientific procedure undertaken to make a discovery, test a hypothesis, or demonstrate a known fact.