Which of the following statements is NOT correct?A.A bond is created in the primary market.B.An investor selling the bond to another investor is victim of a capital loss if he/she resells the bond at a lower price than it bought it.C.When the investor waits for the bond to mature at redemption date there is no capital loss.D.A bond is traded among investors in the secondary market.
Question
Which of the following statements is NOT correct?A.A bond is created in the primary market.B.An investor selling the bond to another investor is victim of a capital loss if he/she resells the bond at a lower price than it bought it.C.When the investor waits for the bond to mature at redemption date there is no capital loss.D.A bond is traded among investors in the secondary market.
Solution
The statement that is NOT correct is C. "When the investor waits for the bond to mature at redemption date there is no capital loss." This statement is not always true. If an investor buys a bond at a premium (above its face value) and holds it until maturity, they will experience a capital loss. This is because the issuer will only pay back the face value of the bond at maturity, not the premium the investor initially paid.
Similar Questions
Anna buys a bond in the secondary market at $100 and waits for the bond to reach its maturity date.Which of the following statements is NOT correct?A.She pays $100 to another investor in exchange for the bond.B.She will receive $100 from the company that had borrowed money.C.She will NOT make any capital gain or loss.D.Her investment is not risky as she does not make any capital loss.
Which of the following statements describes capital loss?Multiple choice question.The loss suffered by the real estate who sells the property prior to the payback date of the full principal when the price of the property increasesThe loss suffered by the bondholder who sells the bond prior to the payback date of the full principal when the price of a bond fallsThe opportunity cost of holding money as an assetThe loss suffered by a money holder who doesn't deposit money in a bank account when the interest increases
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Of the following statements, which best describes a bond market?Group of answer choicesThe bond market is a place where investors go to trade securities (i.e. shares) issued by corporationsThe bond market is where investors go to buy and sell debt securities issued by corporations or governmentsThe bond market is where investors go to buy and sell debt securities on various electronic exchanges
Which of the following statements is NOT correct?A.Companies in need of funds raise funds by issuing financial instruments in the primary market.B.A financial instrument has one issuer but possibly successive owners thanks to the secondary market.C.Owners of financial instruments can sell them in the secondary market and the buyer becomes the new investor in the financial instrument.D.Owners of financial instruments can sell them to other investors in the primary market.
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