An investor purchased $10,000 of a 15 year AA rated corporate bond with a 6% coupon in the secondary market 3 years ago at par. The bond matured last week and the investor has just received a check for $10,300. Which of the following is a true statement?
A) $300 is considered a return of principal.
B) $300 is taxed as ordinary income.
C) $300 is taxed as long-term capital gain.
D) The investors cost basis has been reduced to $9,700.
Answer: B) $300 is taxed as ordinary income.