Homework Help is Here – Start Your Trial Now!
Business
Finance
Calculate a one-year holding period return (HPR) for the following two investment alternatives: 1. Which investment would you prefer, assuming they are of equal risk? Explain. Review Only Click the icon to see the Worked Solution. The HPR for investment X is %. (Enter as a percentage and round to two decimal places.) The HPR for investment Y is %. (Enter as a percentage and round to two decimal places.) the investments beyond 1 Which, if any, of the return components is likely not to be realized if you continue to hold each year? (Choose the best answer below.) O A. If the investments are held beyond 1 year, only the capital loss on Investment X would not be realized; the capital gain on Investment Y would be realized. B. If the investments are held beyond 1 year, only the current income on Investment Y would not be realized; the current income on Investment X would be realized because these cash flows occur earlier in the investment period. C. If the investments are held beyond 1 year, the capital gain (loss) component would not be realized and would likely change. D. If the investments are held beyond 1 year, the current income component would not be realized and would likely change.

Calculate a one-year holding period return (HPR) for the following two investment alternatives: 1. Which investment would you prefer, assuming they are of equal risk? Explain. Review Only Click the icon to see the Worked Solution. The HPR for investment X is %. (Enter as a percentage and round to two decimal places.) The HPR for investment Y is %. (Enter as a percentage and round to two decimal places.) the investments beyond 1 Which, if any, of the return components is likely not to be realized if you continue to hold each year? (Choose the best answer below.) O A. If the investments are held beyond 1 year, only the capital loss on Investment X would not be realized; the capital gain on Investment Y would be realized. B. If the investments are held beyond 1 year, only the current income on Investment Y would not be realized; the current income on Investment X would be realized because these cash flows occur earlier in the investment period. C. If the investments are held beyond 1 year, the capital gain (loss) component would not be realized and would likely change. D. If the investments are held beyond 1 year, the current income component would not be realized and would likely change.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question
**One-Year Holding Period Return (HPR) Calculation and Analysis** **Problem Statement:** Calculate a one-year holding period return (HPR) for two investment alternatives. Which investment would you prefer, assuming they are of equal risk? Explain your choice. **Instructions:** 1. **Calculate HPR:** - The HPR for investment X is ________ %. (Enter as a percentage and round to two decimal places.) - The HPR for investment Y is ________ %. (Enter as a percentage and round to two decimal places.) 2. **Analyze Return Components:** - Determine which, if any, of the return components is likely not to be realized if each investment is held beyond one year. Choose the best answer below: **Options:** - **A.** If the investments are held beyond 1 year, only the capital loss on Investment X would not be realized; the capital gain on Investment Y would be realized. - **B.** If the investments are held beyond 1 year, only the current income on Investment Y would not be realized; the current income on Investment X would be realized because these cash flows occur earlier in the investment period. - **C.** If the investments are held beyond 1 year, the capital gain (loss) component would not be realized and would likely change. - **D.** If the investments are held beyond 1 year, the current income component would not be realized and would likely change. 3. **Preference Decision:** - Which investment would you prefer, assuming they are of equal risk? Choose the best answer below. For detailed solutions and explanations, please refer to the worked solution section by clicking the designated icon.
Transcribed Image Text:**One-Year Holding Period Return (HPR) Calculation and Analysis** **Problem Statement:** Calculate a one-year holding period return (HPR) for two investment alternatives. Which investment would you prefer, assuming they are of equal risk? Explain your choice. **Instructions:** 1. **Calculate HPR:** - The HPR for investment X is ________ %. (Enter as a percentage and round to two decimal places.) - The HPR for investment Y is ________ %. (Enter as a percentage and round to two decimal places.) 2. **Analyze Return Components:** - Determine which, if any, of the return components is likely not to be realized if each investment is held beyond one year. Choose the best answer below: **Options:** - **A.** If the investments are held beyond 1 year, only the capital loss on Investment X would not be realized; the capital gain on Investment Y would be realized. - **B.** If the investments are held beyond 1 year, only the current income on Investment Y would not be realized; the current income on Investment X would be realized because these cash flows occur earlier in the investment period. - **C.** If the investments are held beyond 1 year, the capital gain (loss) component would not be realized and would likely change. - **D.** If the investments are held beyond 1 year, the current income component would not be realized and would likely change. 3. **Preference Decision:** - Which investment would you prefer, assuming they are of equal risk? Choose the best answer below. For detailed solutions and explanations, please refer to the worked solution section by clicking the designated icon.
## 1: Data Table ### Investment | | X | Y | |---------------|--------|-------| | **Cash received** | | | | 1st quarter | $1.08 | $2.22 | | 2nd quarter | $0.22 | $2.22 | | 3rd quarter | $0.61 | $2.22 | | 4th quarter | $4.96 | $2.22 | | **Investment value** | | | |----------------------|--------|-------| | Beginning of year | $33.11 | $59.44| | End of year | $38.43 | $68.74| (Note: Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)
Transcribed Image Text:## 1: Data Table ### Investment | | X | Y | |---------------|--------|-------| | **Cash received** | | | | 1st quarter | $1.08 | $2.22 | | 2nd quarter | $0.22 | $2.22 | | 3rd quarter | $0.61 | $2.22 | | 4th quarter | $4.96 | $2.22 | | **Investment value** | | | |----------------------|--------|-------| | Beginning of year | $33.11 | $59.44| | End of year | $38.43 | $68.74| (Note: Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Mutual Funds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS