关于overvalued

问题如下：

Celia realizes that the fund’s return may decrease if the equity allocation of the fund is reduced. Celia decides to liquidate $20 million of US Treasuries that are currently owned and to invest the proceeds in the US corporate bond sector. To fulfill this strategy, Celia asks Dan, a newly hired analyst for the fund, to recommend specific Treasuries to sell and corporate bonds to purchase.

Dan recommends Treasuries from the existing portfolio that he believes are over-valued and will generate capital gains. Celia asks Dan why he chose only overvalued bonds with capital gains and did not include any bonds with capital losses. Dan responds with two statements.

• Statement 1 Taxable investors should prioritize selling overvalued bonds and always sell them before selling bonds that are viewed as fairly valued or undervalued.
• Statement 2 Taxable investors should never intentionally realize capital losses.

Are Dan’s statements to Celia that support Dan’s choice of bonds to sell correct?

选项：

A.

Only Statement 1 is correct.

B.

Only Statement 2 is correct.

C.

Neither Statement 1 nor Statement 2 is correct.

解释：

Correct Answer: C

C is correct. Since the fund’s clients are taxable investors, there is value in harvesting tax losses. These losses can be used to offset capital gains within the fund that will otherwise be distributed to the clients and result in higher tax payments, which decreases the total value of the investment to clients. The fund has to consider the overall value of the investment to its clients, including taxes, which may result in the sale of bonds that are not viewed as overvalued. Tax-exempt investors’ decisions are driven by their investment views without regard to offsetting gains and losses for tax purposes.