An investor bought 10 Ellis Industries, Inc. long-term bonds 1 year ago, when th

Question

An investor bought 10 Ellis Industries, Inc. long-term bonds 1 year ago, when the company first issue them. In addition, he bought 200 shares of the company's common stack at the same time for $30 per share. He paid $1,000 each for the bonds, and today the bonds are selling at $950 each.The bonds have a stated interest rate of 12 percent per year. the investor received an interest payment equaling $60 per bond 6 months ago and has just received another $60 interest payment payment per bond. calculate the investors percentage holding peroid return for the 1 year he has held the bonds.

Explanation / Answer

Percentage holding period return

= [(9,500 - 10,000 + 2(600))/10,000] x100%

= 7%

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