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 1 year ago

Next > < Previous

Related Solutions

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 ...

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...

On January 2, 2010, Sayre Company purchased a machine for $45,000. The machine has a five-year...

On January 2, 2010, Sayre Company purchased a machine for $45,000. The machine has a five-year estimated useful life and a $5,000 estimated residual value. In addition, the company expects to use the machine 250,000 hours. Assuming that the machine was used 40,000 and 45,000 hours during 2010 and 2011, respectively, complete the following chart. Depreciation Expense 1st Year Depreciation Expense 2nd Year Accumulated Depreciation Net Book Value Straight-Line Method Declining Balance Method

On January 1, 2020, Sarasota Company purchased $432,000 worth of 8% bonds of Aguirre Co. for...

On January 1, 2020, Sarasota Company purchased $432,000 worth of 8% bonds of Aguirre Co. for $398,642. The bonds were purchased to yield 10% interest. Interest is payable semi-annually, on July 1 and January 1. The bonds mature on January 1, 2025. Sarasota Company uses the effective interest method to amortize the discount or premium. On January 1, 2022, to meet its liquidity needs, Sarasota Company sold the bonds for $400,384, after receiving interest. Prepare the journal entry to record...

On January 1, a company purchased 3%, 20-year corporate bonds for $69,057,808 as an investment. The...

On January 1, a company purchased 3%, 20-year corporate bonds for $69,057,808 as an investment. The bonds have a face amount of $80 million and are priced to yield 4%. Interest is paid semiannually. Prepare a partial amortization table at the effective interest rate on June 30 and December 31. Prepare the journal entries necessary to record revenue at the effective interest rate on June 30 and December 31. Period-End Cash Interest Received Bond Interest Revenue Discount Amortization Carrying Value...

Company A purchased a lathe on January 1, 2019, at a cost of $45,000. At the...

Company A purchased a lathe on January 1, 2019, at a cost of $45,000. At the time of purchase, the lathe was expected to have a five-year economic life and a residual value of $3,000. Company A uses straight-line depreciation. At the beginning of 2021, Company A estimated the lathe to have a remaining life of four years with no residual value. For the year ended December 31, 2021, Company A would report depreciation expense of: A. $6750 B. $7050...

It is early 2015, and you are thinking about buying some Greek bonds. a. You know...

It is early 2015, and you are thinking about buying some Greek bonds. a. You know that Greek bonds have very risky. Why would you still want to buy them, given that there is a high chance of default and non-payment? b. For the following situations, sketch a demand and supply diagram and explain what happens with the 1) price, 2) quantity of bonds sold and 3) the interest rate. Write 1-2 sentences to explain. 1. There are protests in...

Subjects

Question

In early January 2010​, you purchased ​$45,000 worth of some​ high-grade corporate bonds. The bonds carried...

Solutions

Expert Solution

Related Solutions

In early January 2010, you purchased $45,000 worth of some high-grade corporate bonds. The bonds carried...