Leona Borrows $100,000 from First National Bank and Uses the Proceeds

question 81

True/False

Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds.The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.

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Definitions:

Trading Securities

Financial instruments such as stocks and bonds that are bought and sold for the purpose of generating profits on short-term fluctuations in their prices.

Held-to-Maturity Securities

Held-to-maturity securities are debt securities that an investor intends and is able to hold until their maturity date, recorded at amortized cost.

Unrealized Holding

Gains or losses on investments that have not yet been sold and so are not yet reflected in the income statement.

Debt Securities

Financial instruments representing money borrowed that must be repaid, which include bonds, notes, and bills.