Final answer:
The profit a bond trader earns from buying and reselling a bond is known as the bid-ask spread. This profit comes from the difference between the purchase price (bid) and the resale price (ask) of the bond, distinct from the bond yield or capital gain.
Step-by-step explanation:
The profit earned by a bond trader from the purchase and resale of a bond is referred to as the bid-ask spread. This is not to be confused with the bond yield, which is the rate of return a bond is expected to pay at the time of purchase, or the capital gain, which is a financial gain from buying an asset at a lower price and selling it at a higher price.
When a bond trader buys and then sells a bond, the difference between the price at which they bought the bond (the bid price) and the price at which they sold the bond (the ask price) constitutes their profit, or the bid-ask spread. The yield of a bond includes both the interest payments received over time and any capital gain achieved if the bond is sold for more than the purchase price. However, this overall profitability is not the same as the immediate trading profit characterized by the bid-ask spread.