Conyers Bank holds U.S.Treasury bonds with a book value of $30 million.However, the U.S.Treasury bonds currently are worth $28,387,500. The bank's portfolio manager wants to shorten asset maturities.Which of the following statements is true?
A)The portfolio manager is reluctant to sell the bonds outright since the bank will have to take a loss.
B)The portfolio manager is willing to sell the bonds outright since they are not as valuable as their book value.
C)The portfolio manager is willing to sell the bonds outright since they are more valuable than their book value.
D)The portfolio manager is reluctant to sell the bonds outright since the bank will have to pay taxes on the gain.
E)None of the options.

Question

Quizplus · Accepted Answer

The portfolio manager is reluctant to sell the bonds outright since the bank will have to take a loss. If they sell the bonds at their current market value, they will realize a loss of $1,612,500. It's possible that the portfolio manager may choose to hold onto the bonds until they mature, or they may choose to sell them gradually over time to minimize the loss.

Conyers Bank Holds U