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Please answer with explanation, thanks. In early January 2010, you purchased $22,000 worth of some high-grade corporate bonds.
Please answer with explanation, thanks.
In early January 2010, you purchased $22,000 worth of some high-grade corporate bonds. The bonds carried a coupon of
----6
----8
and mature in 2024. You paid 95.042 when you bought the bonds. Over the five years from 2010 through 2014 the bonds were priced in the market as follows:
Qoted price (%of 1000 par value)
Year---------Beginning of the year----------------End of year-------Average period on high-grade corporation bond
2010--------------95.042-----------------------------101.226---------------------------7.30%
2011--------------101.226----------------------------103.485--------------------------11.72%
2012--------------103.485----------------------------108.094-------------------------(-6.89%)
2013--------------108.094----------------------------114.338--------------------------7.90%
2014--------------114.338----------------------------125.359--------------------------9.11%
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 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?
