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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 Year

End of

the Year

Average Holding Period Return

on​ High-Grade Corporate Bonds

2010

94.312

102.192

7.30%

   

2011

102.192

103.894

11.72%

2012

103.894

108.295

negative 6.89​%

20132013

108.295108.295

116.856116.856

77.90​%

2014

116.856

127.285

9.11​%

Coupon payments were made on schedule throughout the​ 5-year period.

a. Find the annual holding period returns for2010 through 2014 ​(See Chapter 5 for the HPR​ formula.)

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.

1: The holding period return for 2010,2011,2012,2013,2014 is_______%. ​(Round to two decimal​ places.)

2. 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. (Select the best choice​ below.)

The market has outperformed the corporate bond investment. The average rate of return for the investment is_____​% versus the average market rate of____%.

The​ high-grade corporate bond investment has outperformed the market. The average rate of return for the investment is______​% versus the average market rate of______​%.

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I WAS NOT ABLE TO READ COUPON RATE AS IT WAS NOT CLEARLY WRITTEN.

I HAVE TAKEN IT = 8 5/8% =8.625%

jeff jeffy answered 2 years ago
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