If an investor buys $1 million of 10% corporate bonds at par and the bonds close up 1/2 point at the end of the day, what is the gain?

When an investor buys bonds at par, they are paying the full face value of the bonds. In this scenario, the investor has purchased $1 million worth of corporate bonds with a 10% coupon rate, which means they will receive $100,000 in interest payments annually (10% of $1 million).

The question specifies that the bonds closed up 1/2 point at the end of the day. In bond trading, a point typically refers to 1% of the face value of the bonds. Therefore, a movement of 1/2 point translates to a 0.5% change in the value of the bonds.

To calculate the gain from this change in price, we can apply the following calculation:

1. Determine the dollar value of the 1/2 point increase:

[

0.5% \text{ of } $1,000,000 = 0.005 \times $1,000,000 = $5,000.

]

Thus, if the bonds appreciated by 1/2 point, the investor would realize a gain of $5,000 based on the change in market value.

While the choice marked as C involves a different overall number,