Please answer on word doc. Only Question 13 and 15 need to be answered. Please OMIT question 14....

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Please answer on word doc. Only Question 13 and 15 need to be answered. Please OMIT question 14. This is a discussion assignment if asked to explain please be at least 150 words for question 15 my age is 25.

Tanmoy · Accepted Answer

Corporate Finance
1. What is a premium bond? Is there a build in capital gain or loss for premium bond?
A premium bond is a bond which trades above it face value. Also the cost price of the bond is higher than the face value of the bond. These bonds can also trade at a premium due to its high interest rates which is higher than the current rates in the market. 
If the bond is bought at a premium then the capital losses depends on the taxable or tax free municipal bond. It is better to opt for amortizing the premium by the investor when the bond is bought at a premium. This helps to deduct the amortized amount of premium from the annual income. Thus, during selling a bond whose premium will be amortized, there will be a capital gain if the bond is sold above the adjusted cost basis.

Please answer on word doc. Only Question 13 and 15 need to be answered. Please OMIT question 14. This is a discussion assignment if asked to explain please be at least 150 words for question 15 my age...

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