Question

Two investors are each issued one bond with the same face value, maturity date, and yield. After both bonds have reached maturity, it is discovered that one of the bondholders received a greater total return on her investment. If all expected payments were received, which of the following could explain the difference in return?(1 point)
Responses

One of the bonds was a corporate bond while the other was a savings bond.
One of the bonds was a corporate bond while the other was a savings bond.

One of the bonds was a municipal bond while the other was a savings bond.
One of the bonds was a municipal bond while the other was a savings bond.

One of the bonds was sold at face value while the other was sold below face value.
One of the bonds was sold at face value while the other was sold below face value.

One of the bonds earned greater interest payments than the other.

Answer 1

The difference in total return on the bonds can be explained by the following option:

**One of the bonds was sold at face value while the other was sold below face value.**

This scenario would result in one investor receiving a higher overall return, as the total return on a bond includes both the interest payments and any capital gains or losses from the bond’s purchase price compared to its face value at maturity. If one bond was purchased for less than its face value, that investor would realize a capital gain when the bond matures, leading to a greater total return.