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

Expert Solution

jeff jeffy answered 6 months ago
Next > < Previous

Related Solutions

In early January 2010​, you purchased ​$45,000 worth of some​ high-grade corporate bonds. The bonds carried...
In early January 2010​, you purchased ​$45,000 worth of some​ high-grade corporate bonds. The bonds carried a coupon of 8 font size decreased by 1 font size decreased by 1 font size decreased by 1 5/8 %(one and five eighths) and mature in 2024. You paid 94.312 when you bought the bonds. Over the five years from 2010 through 2014​, the bonds were priced in the market as​ follows: Quoted Prices​ (% of​ $1,000 par​ value) Year Beginning of the...
In early January 2010​, you purchased $24,000 worth of some​ high-grade corporate bonds. The bonds carried...
In early January 2010​, you purchased $24,000 worth of some​ high-grade corporate bonds. The bonds carried a coupon of 6.5 % and mature in 2024. You paid 96.086 when you bought the bonds. Over the five years from 2010through 2014​, the bonds were priced in the market as​ follows: Quoted Prices (% of $1,000 par value) Year Beginning of the Year End of the Year Average Holding Period Return on High-Grade Corporate Bonds 2010 96.086 102.673 7.30% 2011 102.673 104.365...
In early January 2010​, you purchased ​$34,000 worth of some​ high-grade corporate bonds. The bonds carried...
In early January 2010​, you purchased ​$34,000 worth of some​ high-grade corporate bonds. The bonds carried a coupon of 7 4/8% and mature in 2024. You paid 93.426 when you bought the bonds. Over the five years from 2010 through 2014​, the bonds were priced in the market as​ follows: Coupon payments were made on schedule throughout the​ 5-year period. A. Find the annual holding period returns for 2010 through 2014. ​(See Chapter 5 for the HPR​ formula.) b. Use...
In early January 2010, you purchased $12,000 worth of some high-grade corporate bonds. The bonds carried...
In early January 2010, you purchased $12,000 worth of some high-grade corporate bonds. The bonds carried a coupon of 7 6/8% and mature in 2024. You paid 94.643 when you bought the bonds. Over the five years from 2012 through 2014, the bonds were priced in the market as follows: Coupon payments were made on schedule throughout the 5-year period. a. Find the annual holding returns for 2010 through 2014. (HPR formula) b. Use the average return information in the...
In early January 2014​, you purchased $83,000 worth of some​ high-grade corporate bonds. The bonds carried...
In early January 2014​, you purchased $83,000 worth of some​ high-grade corporate bonds. The bonds carried a coupon of 7​% and mature in 2027. You paid 101.477 when you bought the bonds. Over the five years from 2014 through 2018​, the bonds were priced in the market as​ follows:    Quoted Prices (% of $1,000 par value)       Year   Beginning of the Year   End of the Year   Average Holding Period Return on High-Grade Corporate Bonds 2014   101.477 110.926 -8.90% 2015  ...
Paper Printing Company purchased a copy machine for $ 65 comma 000$65,000 on January​ 1, 2010....
Paper Printing Company purchased a copy machine for $ 65 comma 000$65,000 on January​ 1, 2010. The copy machine had an estimated useful life of five years or 1 comma 000 comma 0001,000,000 copies. Paper Printing estimated the copy​ machine's salvage value to be $ 5 comma 000$5,000. The company made   250 comma 000250,000 copies in 2010 and 190 comma 000190,000 copies in 2011.Requirements LOADING... 1. Calculate the depreciation expense for each year using the straight line method. - =...
A business purchased equipment for $ 125 comma 000$125,000 on January? 1, 2019. The equipment will...
A business purchased equipment for $ 125 comma 000$125,000 on January? 1, 2019. The equipment will be depreciated over the five years of its estimated useful life using the straightminus?line depreciation method. The business records depreciation once a year on December 31. Which of the following is the adjusting entry required to record depreciation on the equipment for the year? 2019? (Assume the residual value of the acquired equipment to be? zero.)?? A. Debit $ 125 comma 000$125,000 to Depreciation...
On January​ 1, 20142014​, Small RockSmall Rock Brewery purchased a van for $ 37 comma 000$37,000....
On January​ 1, 20142014​, Small RockSmall Rock Brewery purchased a van for $ 37 comma 000$37,000. Small RockSmall Rock expects the van to have a useful life of eighteight years and a residual value of $ 4 comma 000$4,000. The depreciation method used was​ straight-line. On December​ 31, 20172017​, the van was sold for $ 21 comma 000$21,000 cash. 1. What was the carrying amount of the van at the date of​ sale? 2. Record the sale of the van...
KLM Ltd purchased new equipment on 1st January 2010, at a cost of $420 000 net...
KLM Ltd purchased new equipment on 1st January 2010, at a cost of $420 000 net of GST. The company estimated that the equipment had a useful life of 5 years and a residual value of $45 000. Required Assuming a financial year ending 30th June, calculate the amount of depreciation expense for each year ending 30th June 2010 through to 30th June 2015, with each of the following methods: (a) straight line 2 marks (b) sum-of-years-digits 4 marks (c)...
You are examining three bonds with a par value of ​$1000 ​(you receive ​$1 comma 000...
You are examining three bonds with a par value of ​$1000 ​(you receive ​$1 comma 000 at​ maturity) and are concerned with what would happen to their market value if interest rates​ (or the market discount​ rate) changed. The three bonds are Bond A-bond with 6 years left to maturity that has an annual coupon interest rate of 12 ​percent, but the interest is paid semiannually. Bond B-bond with 9 years left to maturity that has an annual coupon interest...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT