Finra Exam Series-7 Topic 5 Question 95 Discussion

Actual exam question for Finra's Series-7 exam

Question #: 95
Topic #: 5

[All Series-7 Questions]

Bubba buys a municipal bond at 102 and holds it ten years to maturity.

For tax purposes, how is that premium treated?

Arecorded as a long-term capital loss

Ban ordinary loss taken as a deduction from taxable income

Camortized over the life of the bond resulting in no loss at maturity

Dcarried forward as a premium loss applied against profits realized on future municipal securities

Show Suggested Answer

Suggested Answer: B

the LEAPS premium will be higher than the traditional option premium. Because LEAPS have a longer time until expiration than traditional options, the premium should be higher.

by Valentine at Aug 24, 2024, 09:51 AM

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Tarra

4 days ago

I think the premium is amortized over the life of the bond, so no loss at maturity.

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