Question

An investor purchased a bond 45 days ago for $985. He received $30 in interest and sold the bond for $980. What is the holding-period return on his investment?
Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.

Answer 1

In the given case, Investor purchased bond at $985 (45 days ago) and received interest$30 and sold the same for $980.

So, to calculate holding period return, we ne need to calculate return for holding period i.e 45 Days after considering interest.

Thus, Holding period return = (Selling price + Interest received - purchase price)/purchase price

Where Selling price = $980, Interest Received = $30, Purchase price = $985

Thus Holding period return = (980+30-985)/985 = 2.538% i.e 0.0253

Thus, Holding period of investor for his Investment = 0.0253