Chartered Financial Analyst Level 1
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Ultimate access to all questions.
An investor sells a fixed-rate bond originally purchased at a discount. The resulting capital gain or loss should be measured by comparing the bond's selling price with its:
Explanation:
Explanation:
Capital gains and losses are measured from the carrying value of the bond, not from the purchase price or par value. The carrying value includes the amortization of any discount or premium if the bond was purchased below or above par value. It represents the bond's value on the constant-yield price trajectory. Therefore, the correct answer is B (carrying value).