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Calculate a one-year holding period return (HPR) for the following two investment alternatives: E. Which investment would you prefer, assuming they are of equal
Calculate a one-year holding period return (HPR) for the following two investment alternatives: E. Which investment would you prefer, assuming they are of equal risk? Explain. 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.) Which, if any, of the return components is likely not to be realized if you continue to hold each of the investments beyond 1 year? (Choose the best answer below.) OA. 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. OB. If the investments are held beyond 1 year, the current income component would not be realized and would likely change. OC. 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. OD. If the investments are held beyond 1 year, the capital gain (loss) component would not be realized and would likely change. Which investment would you prefer, assuming they are of equal risk? (Choose the best answer below.) OA. Investment X would be preferred since it offers the larger capital gain (loss). OB. Investment X would be preferred since it offers the higher holding period return. OC. Investment X would be preferred since it offers more intra-year cash flows ($1.20, $0.20, and $3.80 for X versus $2.00 for Y). OD. Investment Y would be preferred since it offers a capital gain, while investment X would not be preferred due to the capital loss. Data table Cash received 1st quarter 2nd quarter 3rd quarter 4th quarter Investment value Beginning of year End of year X Investment $1.20 $0.20 $0.40 $3.80 $30.00 $35.00 Y $2.00 $2.00 $2.00 $2.00 $56.00 $56.00 O - X
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