If Bonds with Face Value of $ 100,000 Are Redeemed

question 25

Multiple Choice

If bonds with face value of $ 100,000 are redeemed at 98 before maturity when the amortized cost is $ 92,000, what would be the resulting gain or loss on the transaction?

• A) loss of $ 1,840
• B) loss of $ 6,000
• C) gain of $ 6,000
• D) gain of $ 1,840

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Definitions:

Portfolio's Sigma

A statistical term that represents the standard deviation of returns of an investment portfolio, reflecting its risk.

Mean-Variance Efficient Portfolio

A portfolio construction theory that suggests the best investment portfolio is one that offers the highest expected return for a given level of risk or the lowest risk for a given level of expected return.

Single-Index Structure

A portfolio model that relates the returns on each asset to a single market index.

Sensitivity Coefficients

Measurements that indicate how much the output of a mathematical model or system can change in response to changes in its inputs.