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 given table to evaluate the investment performance of this bond. How do you think it stacks up against the market? Explain.

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	94.643	103.8744	7.30%
2011	103.874	105.093	11.72%
2012	105.093	107.748	−6.89%
2013	107.748	114.996	7.90%
2014	114.996	128.676	9.11%

Expert Solution

jeff jeffy answered 1 year ago

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