A newly issued bond pays its coupons once annually. Its coupon rate is 5.2%, its maturity is 20 years, and its yield to maturity is 7%. a. Find the holding-period return for a 1-year investment period if the bond is selling at a yield to maturity of 6% by the end of the year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

holding period return is 14.20%

Explanation:

In calculating the holding period return, the formula to use is given below

HPR=P1-P0+interest/P0

P1  is the price of the bond in year 1

P0 is the price of the bond in year 0

Interest is the coupon received in year 1

Price is the present value of the bond calculated using the pv formula in excel

=pv(rate,nper,pmt,fv)

rate is the yield to maturity

pmt is the interest payment which is 5.2%*$1000=$52

nper is the number of years to maturity

fv is $1000

for P0 =pv(7%,10,52,1000)

P0=$873.58  

For P1

=pv(6%,9,52,1000)

P1=$945.59  

HPR=($945.59 -$873.58+$52)/$873.58  

HPR=14.20%

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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