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16 March, 01:00

An investor buys a bond for $10,000. The bond pays $300 interest every 6 months. After 18 months, the investor sells the bond for $9,500. Describe the types of income and/or loss the investor had?

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  1. 16 March, 04:05
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    Purchase of a bond is an investment. Interest paid every six months is known as a coupon payment.

    Profit or loss = (Income from sale + coupons) - original price

    In 18 months, the investor would receive income from the sale of the bond ($9,500) in addition to the three-six month coupons payments amounting to = $300 * 3 = $900

    Profit or loss = ($9,500 + $900) - $10,000

    Profit or loss = $10,400 - $10,000

    Profit = $400
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