Helen Purchases a $10,000 Corporate Bond at a Premium of $1,000

question 68

True/False

Helen purchases a $10,000 corporate bond at a premium of $1,000 and elects to amortize the premium.On the later sale of the bond for $10,800, she has amortized $300 of the premium.Helen has a recognized gain of $800 ($10,800 amount realized - $10,000 adjusted basis).

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Definitions:

Total Return

The overall financial gain or loss on an investment over a period of time, including dividends, interest, and capital gains.

Annual Dividends

The total amount of dividend payments declared by a corporation in one fiscal year, distributed to shareholders on an annual basis.

Dividend Increase

A company's action to raise the amount of money paid to shareholders out of its profits on a per-share basis.

Required Return

The minimal yearly percentage increase essential to entice investment by individuals or companies into a certain project or security.