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Suppose, three years ago, you purchased a 15-year coupon bond paying 5% interest annually with a...

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Accounting

Suppose, three years ago, you purchased a 15-year coupon bondpaying 5% interest annually with a face value of $1000. It is nowthree years later and you just received an interest paymentyesterday (the bond matures in exactly twelve years). You look inthe paper and the yield on comparable debt is 6%. If you bought itat Par value, did you have a capital gain or loss? Also, if theyield decreased to 4.5%, would you have a capital gain or loss, orcould you tell?

Group of answer choices

Capital Gain; CapitalGain                                                      

Capital Gain; Capital Loss

Capital Loss; Capital Loss

none of them

Capital Loss; Capital Gain

Answer & Explanation Solved by verified expert
3.6 Ratings (482 Votes)
Option E Capital Loss Capital Gain When the yeild rate of a bond increases the price of the bond decreases When Yeild rate increases to 6 the value of bond decreases to 91505 hence a Capital Loss occurs    See Answer
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