Kim Back Invested $20,000 One Year in Corporate Bonds

question 95

Multiple Choice

Kim Back invested $20,000 one year in corporate bonds. Each bond sold for $1,000 and earned a coupon payment of $80 each during the year. The price of the bond at the end of the year dropped to $980. Which of the following is Kim's total dollar gain or loss on her investment?

• A) $1,600
• B) −$400
• C) $1,200
• D) $1,000

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Definitions:

Ounce

A unit of weight commonly used in the United States and the United Kingdom, equal to one-sixteenth of a pound or approximately 28.35 grams.

Futures Contract

A standardized legal agreement to buy or sell an asset at a predetermined price at a specified time in the future.

Futures Contract

A futures contract is a standardized legal agreement to buy or sell a particular commodity or financial asset at a predetermined price at a specified time in the future.

Coffee

A brewed drink prepared from roasted coffee beans, which are the seeds of berries from the Coffea plant.