Charles purchased a $1,000 face value

| June 1, 2016

Three years ago, Charles purchased a $1,000 face value 10-yearTreasury note for par. The market value of this bond is now $950. If Charles sells the bond today, the tax implications of sale are

A. $50 loss against ordinary income

B. $50 capital gain

C. $50 capital loss

D. $50 gain against ordinary income

E. No tax effects since Treasury securities are exempt from taxes

Two years ago, an investor purchased a $1,000 par 6% coupon bond that pays interest semiannually. Inflation over the next two years has been 2% per year. The inflation-adjusted value of the next interest payment is

A. $28.84

b. $30.00

c. $31.21

D. $57.67

E. $60.00

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