What are the two components of the total gain from bonds?

• A. Realized gain on sale/maturity; Other realized adjustments
• B. Interest income; Dividends
• C. Coupon payments; Reinvestment income
• D. Foreign exchange gain on disposal; Amortization

Answer: (A)

Total gain from bonds comes from two realized pieces. The first is the realized gain on sale or at maturity, which is the cash proceeds you actually receive minus the bond’s carrying amount (amortized cost) at the disposition or redemption date. If you sell or redeem for more than the carrying amount, you realize a gain; if less, you realize a loss.

The second piece is other realized adjustments, capturing any additional gains or losses that are recognized in earnings in the period but aren’t tied to the disposal event. These adjust the carrying amount or reflect other realized changes in value that occur outside of a sale or maturity.

So the total gain is the sum of the gain from disposal plus these other realized adjustments.