Question

brenda has money invested in esti transport. she owns two par value $1,000 bonds issued by esti transport, which currently sells bonds at a market rate of 101.345. she also owns 116 shares of esti transport stock, currently selling for $15.22 per share. if, when brenda made her initial investments, esti transport bonds had a market rate of 96.562 and esti transport stock had a share price of $13.40, which side of brendas investment has gained a greater percent return, and how much greater is it? (hint: difference/original)
a. the bonds showed a return that was 4.78 percentage points higher than that of the stocks.
b. the bonds showed a return that was 4.95 percentage points higher than that of the stocks.
c. the stocks showed a return that was 8.63 percentage points higher than that of the bonds.
d. the stocks showed a return that was 3.58 percentage points higher than that of the bonds.
please select the best answer from the choices provided

Explanation:

Step1: Calculate bond % return

Market rate is % of par.
Initial bond value per $1000 par: $1000 \times \frac{96.562}{100} = 965.62$
Current bond value per $1000 par: $1000 \times \frac{101.345}{100} = 1013.45$
Bond return %: $\frac{1013.45 - 965.62}{965.62} \times 100 \approx 4.95\%$

Step2: Calculate stock % return

Initial stock value per share: $\$13.40$
Current stock value per share: $\$15.22$
Stock return %: $\frac{15.22 - 13.40}{13.40} \times 100 \approx 13.58\%$

Step3: Find return difference

Subtract stock return from bond return: $13.58\% - 8.63\% = 4.95$ percentage points

Answer:

b. The bonds showed a return that was 4.95 percentage points higher than that of the stocks.