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Chapter 12 Financial Planning Exercise 15 Calculating current yield and return on investment Assume that an investor pays $900 for a long-term bond that carries a coupon. During the next 12 months, interest rates drop sharply, and the investor sells the bond at a price of $962.50. Assume bond par value is $1,000 a. Find the current yield that exosted on this bond at the beginning of the year. Round the answer to two decimal places What was it by the end of the 1-year holding period? Round the answer to two decimal places. b. Compute the return on this investment using the approximate yield formula and a 1-year inwestment period. Round the answer to two decimal places. Do not round intermediate calculations. Chapter 13 Financial Planning Exercise 11 Calculating and evaluating mutual fund returns Here is the per share performance record of the Abacus Growth-and-Income fund for 2017 and 2016: 2017 2016 1. Net asset value, beginning of period: $54.65 $50.00 2. Income from investment operations: 3. Net investment income $ 1.04 $ 0.70 4. Net gains on securities (realized and unrealized) 10.38 9.50 5. Total income from investment operations $11.42 $10.20 6. Less distributions: 7. Dividends from net investment income (50.47) (50.32) 8. Distributions from realized gains (5.71) (5.23) 9. Total distributions (6.18) (5.55) 10. Net asset value, end of period: $59.89 $54.65 Use this information to find the rate of return earned on this fund in 2016 and in 2017. Round the answers to two decimal places. Do not round intermediate calculations. 2016 20.89 2017 20.409 Chapter 12 Financial Planning Exercise 15 Calculating current yield and return on investment Assume that an investor pays $900 for a long-term bond that carries a coupon. During the next 12 months, interest rates drop sharply, and the investor sells the bond at a price of $962.50. Assume bond par value is $1,000 a. Find the current yield that exosted on this bond at the beginning of the year. Round the answer to two decimal places What was it by the end of the 1-year holding period? Round the answer to two decimal places. b. Compute the return on this investment using the approximate yield formula and a 1-year inwestment period. Round the answer to two decimal places. Do not round intermediate calculations. Chapter 13 Financial Planning Exercise 11 Calculating and evaluating mutual fund returns Here is the per share performance record of the Abacus Growth-and-Income fund for 2017 and 2016: 2017 2016 1. Net asset value, beginning of period: $54.65 $50.00 2. Income from investment operations: 3. Net investment income $ 1.04 $ 0.70 4. Net gains on securities (realized and unrealized) 10.38 9.50 5. Total income from investment operations $11.42 $10.20 6. Less distributions: 7. Dividends from net investment income (50.47) (50.32) 8. Distributions from realized gains (5.71) (5.23) 9. Total distributions (6.18) (5.55) 10. Net asset value, end of period: $59.89 $54.65 Use this information to find the rate of return earned on this fund in 2016 and in 2017. Round the answers to two decimal places. Do not round intermediate calculations. 2016 20.89 2017 20.409
