Question
In: Finance
In early January 2010, you purchased $19 comma 000 worth of some high-grade corporate bonds. The...
In early January 2010, you purchased $19 comma 000 worth of some high-grade corporate bonds. The bonds carried a coupon of 7 4/8% and mature in 2024.
You paid 95.463 when you bought the bonds. Over the five years from 2010 through 2014, the bonds were priced in the market as follows:
| Year | Beginning of the Year |
End of the Year |
Average Holding Period Return on High-Grade Corporate Bonds |
| 2010 | 95.463 | 104.824 | 7.30% |
| 2011 | 104.824 | 106.783 | 11.72% |
| 2012 | 106.783 | 108.567 | -6.89% |
| 2013 | 108.567 | 116.281 | 7.90% |
| 2014 | 116.281 | 128.181 | 9.11% |
Coupon payments were made on schedule throughout the 5-year period.
a. Find the annual holding period returns for 2010 through 2014.
b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain.
a. The holding period return for 2010 is nothing%. (Round to two decimal places.)
The holding period return for 2011 is nothing%. (Round to two decimal places.)
The holding period return for 2012 is nothing %. (Round to two decimal places.)
The holding period return for 2013 is nothing%. (Round to two decimal places.)
The holding period return for 2014 is nothing%. (Round to two decimal places.)
b. Use the average return information in the given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain.
The high-grade corporate bond investment has outperformed the market. The average rate of return for the investment is 13.21% versus the average market rate of 5.83%.
The market has outperformed the corporate bond investment. The average rate of return for the investment is 5.83% versus the average market rate of 13.21%.
Solutions
jeff jeffy answered 1 week agoRelated Solutions
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Year
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Year
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