Many Investors May Be Drawn to Bonds with Capital Gains

question 48

Multiple Choice

Many investors may be drawn to bonds with capital gains only because:

• A)no taxation on capital gains.
• B)high coupon payments.
• C)long periods until maturity.
• D)reduced taxation on capital gains.

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Definitions:

Treasury Bill Rate

The Treasury bill rate is the yield or return on investment for U.S. government debt securities known as Treasury bills, which have short-term maturities.

Cost of Equity

The return a company needs to generate to compensate its equity investors, often calculated using models like the Capital Asset Pricing Model (CAPM).

Financing

The process of providing or obtaining funds for business activities, making purchases, or investing.

Initial Cost

The original expenditure for purchasing an asset or starting a project, excluding maintenance or operating costs.