Question 2.

On May 1, 2015, Candace purchased a taxable bond with a face value of $10,000. The bond matures on May 1, 2018 and has a stated interest rate of 6%. Candace paid $11,000 for the bond on the secondary market, and her yield to maturity is 2.5%. If she received one coupon payment of $600 on May 1, 2016 and chooses annual accrual periods ending on May 1 of each year, what is the amount of her bond premium amortization for the tax year?

$250

$275

$325

$600

Question 3.

On July 6, 2016, Adam purchased an ABC August 50 Put for $500. The option expired on August 19, 2016. On his 2016 return, Adam will report __________.

No gain or loss.

$500 of capital gain.

$500 of capital loss.

$500 of investment expense.

Question 4.

Which of the following persons would most likely be considered a trader?

Nigel trades during the summer when he is home from college. He consults with other traders and sells the stock before going back to college at the end of the summer.

Tristan trades nearly every day. He usually sells after a few days, hoping to profit from short term changes in stock prices.

Ivan trades every day when he gets home from work. He spends time researching the company and holds the stock for a year or more before selling.

Andre trades two or three days a week. He likes to invest in companies that pay regular dividends, although he sometimes sells after holding the stock for a few days.