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kow [346]
3 years ago
8

George has been looking into buying a bond for his portfolio. His greatest investment objective is total return. Which of the fo

llowing bonds would be the BEST choice for George with this objective in mind?
A. A bond which has a price of $850, a Yield to Maturity of 4%, and a Current Yield of 3.75%
B. A bond which has a price of $875, a Yield to Maturity of 3.95%, and a Current Yield of 3.80%
C. A bond which has a price of $825, a Yield to Maturity of 3.5%, and a Current Yield of 3.45%
D. A bond which has a price of $925, a Yield to Maturity of 3.75%, and a Current Yield of 3.65%
Business
1 answer:
Elanso [62]3 years ago
5 0

Answer:

A. A bond which has a price of $850, a Yield to Maturity of 4%, and a Current Yield of 3.75%

Explanation:

Since George is focussed on achieving a high total return for his portfolio, he will consider adding a bond whose yield to maturity (YTM) is the highest. Among these options, option A would be ideal since it has a 4% YTM; he would probably not consider if the price of $850 is high or not . This is the annual interest rate paid on the bond investment.

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A. Stereotype threat

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Answer:

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The arithmetic average of 'n' returns is given by:

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A=\frac{0.05+0.21-0.12+0.07-0.06}{5}\\ A=0.03=3\%

The geometric average of 'n' returns is given by:

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For five returns of 5% ,21%, -12%, 7%, and -6%:

G=\sqrt[5]{(1+0.05)*(1+0.21)*(1-0.12)*(1+0.07)*(1-0.06)}-1\\G=0.0237=2.37\%

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