## Calculating Realized Compound Yield on a Bond

An investor bought a bond at par that matures in 15 years. The bond pays an annual coupon of \$130 and the reinvestment rate is 9%. What is the realized compound yield of this bond? 11.05% 12.55% 13.00% 14.10% CLICK TO REVEAL ANSWER Expand A is the answer. One would anticipate a realized compound yield…

## Maximum Potential Gain On Long Call

What is the maximum potential gain for an investor who is long a call? It is limited to the amount paid for the option Capped by the exercise price It is equal to the loss of a similar short put position Unlimited CLICK TO REVEAL ANSWER Expand The correct answer is number 4.  An investor…

## Solving for Bond Yield

An investor bought a bond at par that matures in 10 years. The bond pays an annual coupon of \$110 and the reinvestment rate is 7%. What is the realized compound yield of this bond? 7.23% 8.01% 9.67% 14.10% CLICK TO REVEAL ANSWER Expand C is the answer. One would anticipate a realized compound yield…

## Rental Property Like-Kind Exchange

William found someone to buy his rental property in Maine. Which of the following properties William would like to purchase as rental property would allow him to complete a like- kind exchange? A golf course rental property in Arizona that William identified 30 days after selling his Maine property. A beach rental house at the…

## Various Sources of Income

A client received an annual salary from his employment of \$40,000. He was a 50% owner of both a C corporation and an S corporation. The C corporation had net profits of \$20,000, and the S corporation had income of \$10,000. Neither corporation made a distribution. The client’s revocable trust had income of \$5,000 but…

## Appropriate Valuation Method

Sam McBuck has an estate of \$10 million and would like to leave it to his nephews. Sam assumes he will live for at least 5 more years. The property in Sam’s estate currently includes the following assets: An apartment building in downtown New York that Sam owns with three partners, each of whom wants…

## Reducing the AMT

Which of the following tax planning ideas would help Beth the most if she currently has to pay AMT taxes? Pay her \$1,000 January mortgage payment before the end of the year. Pay her \$2,000 January alimony payment to her ex-husband before the end of the year. Recognize a \$3,000 short term capital gain on…

## Retirement Funding Calculation

Erika wants \$50,000 a year in today’s dollars in retirement. She anticipates retiring in 10 years and living in retirement for 30 years. Erika can earn 7% on her investments and she expects inflation to average 4%. Approximately how much should Erika have saved by the day she retires to meet this goal? \$913,000 \$983,000…