The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond 's price, all divided by the beginning bond price a What is the holding period return on a bond with a par value of $1,000, and a coupon rate of 6 percent if its price at the beginning of the year was $1,050, and its price at the end was $940 Assume interest is paid annually b Can you give two reasons the price of the bond might have fallen over the year

Question: The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus

The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided by the beginning bond price.
a. What is the holding period return on a bond with a of $1,000, and a rate of 6 percent if its price at the beginning of the year was $1,050, and its price at the end was $940? Assume interest is paid annually.
b. Can you give two reasons the price of the bond might have fallen over the year?

Step by Step Solution

★★★★★

3.37 Rating (169 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a The holding period return is 476 percent 60 1101050 b The bonds ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

1174-B-F-F-M(8603).docx

120 KBs Word File

Students Have Also Explored These Related Finance Questions!

Which of the following equations provide the correct value for F if the effective interest rate is 6%? (Select all that apply) 0 2 3 4 5 6 1 $500 $500 $600 $600 $800

The U.S. Treasury issues a ten-year, zero coupon bond. a) What will be the original issue price if comparable yields are 6 percent? (Assume annual compounding.) b) What will be the price of this zero...

Target Corporation prepares its financial statements according to U.S. GAAP. Targets financial statements and disclosure notes for the year ended February 3, 2018, are available in Connect. This...

In January, 2003, an investor purchased a convertible debenture bond issued by the XLA Corporation. The bond cost $1000 and paid $60 per year interest in annual payments on December 31. Under the...

The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided by the...

Please, Complete questions 1, 3 and 5. Table 5.1 indicates that the average annual rate of return on common stocks over many years has exceeded the return on government bonds in the United States....

The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bonds price, all divided by the...

The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided by the...

The return an Investor earns on a bond over a period of time is known as the holding period return, defined as Interest Income plus or minus the change in the bond's price, all divided by the...

Problem 5 - 5 The return an investor earns on a bond over a period of time is known as the holding period return, defined as interest income plus or minus the change in the bond's price, all divided...

The common shares of Twitter, Incorporated (TWTR) recently traded on the NYSE for $95 per share. You have employee stock options to purchase 1,000 TWTR shares for $100 per share. The options expire...

Jerry Guardino comes to you for advice. He has just purchased a large amount of inventory with the terms 1/10, n/30. The amount of the invoice is $320,000. He is currently short of cash but has good...

Sandra owned a rental apartment building in her sole name for four years. After her business advisors suggested that she conduct her rental activity in corporate form, she promptly transferred the...

Which of the following statements is correct? A . In a direct - financing lease, initial direct costs are added to the net investment in the lease. B . In a sales - type lease, initial direct costs...

Pimental Manufacturing Inc. is the producer of specialty machinery for numerous customers. It had $10,000,000 of sales in 2016 and identified the following costs as being related to quality: Scrap...

The people of the Amazon River basin, who live in rural poverty, have begun burning and clearing large sections of the forest. They are doing so to create farmland in order to earn a living for...

City Place Movie Theaters has four employees and pays them on an hourly basis. During the week beginning June 24 and ending June 30, 2019, these employees worked the hours shown below. Information...

On July 1, 2019, Grams Construction, Inc. agreed to construct a factory for a customer. The contract called for payments to Grams totaling $2 million. Grams have correctly determined that it is...

The Aspen Company is a retail department store chain. The companys fiscal year ends on the Saturday closest to January 31 of each year. The company is publicly held and submits quarterly financial...

Who will be using this data and how will they be using it?

The following table presents selected 2016 annual income statement items and balance sheet items for Toyota Motor and Apple. All dollars are in millions. Use the information to answer the questions...

Universal Products Co. has almost finished its pro forma financial statements for 2018, as shown next. a. Assume that Universal plans to purchase $500,000 in fixed assets during 2018 and to dispose...

Table 3.3 shows the December 31, 2018 pro forma balance sheet and income statements for R&E Supplies, Inc. The pro-forma balance sheet shows that R&E Supplies will need external funding from the bank...

In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $48,000 and the interest rate is 7.75%, the borrower "pays" .0775 times $48,000 = $3,720...

Test 2 (Chapter 3 and 4) 25 points possible 1/25 answered Question 6 Next

Given the following information: \ table [ [ Job , Arrival Time,CPU Cycle ] , [ A , 0 , 1 2 ] , [ B , 2 , 2 ] , [ C , 3 , 1 0 ] , [ D , 6 , 7 ] , [ E , 1 0 , 3 ] ] Calculate which jobs will have...