A Canadian Bond Is Initially Priced at Its Face Value

question 27

Multiple Choice

A Canadian bond is initially priced at its face value of C$1,000. At the end of the year, the bond is selling for C$1,100. If the Canadian dollar appreciates by 10%, with a coupon, what will the U.S. dollar return on the bond equal at the end of the year?

• A) 1.05%
• B) 27.1%
• C) 15%
• D) 20%

Understand how to calculate recognized gain or loss and new basis in property received in exchanges or by involuntary conversion.

Recognize the purpose and application of wash sale rules.

Understand the rules for related party transactions, including sales and loss disallowance.

Comprehend the installment method of reporting gains and the types of assets eligible for this treatment.

---

Definitions:

Pay Off

To completely settle a debt or an obligation.

Compounded Quarterly

A method of calculating interest where the interest is added to the principal balance four times a year.

Extinguish

To put an end to something, such as a debt or obligation, by payment or other settlement.

Payment

The act of transferring money or other valuable items in exchange for goods, services, or to fulfill a contractual obligation.