2% for 2 years and 5% for 29 years. What are the 1 year holding period returns for each of these bonds?

The 1 year holding period return for a 2-year bond with an initial yield of 2% would be 4%. This is calculated by multiplying the initial yield (2%) by the term to maturity (2 years), resulting in 4%. In other words, this means that if someone had invested $100 at the start of the year and held onto it for one year, they would receive back $104 at the end of that time.

The 1 year holding period return for a 29-year bond with an initial yield of 5% would be 5.25%. This is calculated by multiplying the initial yield (5%) by the term to maturity (29 years) and then adding one year\’s worth of coupon payments (5%), resulting in 5.25%. The total amount received after one year on a $100 investment would be $105.25.

When compared to other investments like stocks or mutual funds, bonds often offer more reliable returns as their yields are typically much lower than those available from riskier investments such as equities or commodities. Furthermore, bonds do not require daily monitoring which makes them ideal choices for long-term investors who want steady returns over time without having to constantly adjust their portfolios based on market conditions.

In short, understanding how different types of bonds may behave over various periods can help an investor make informed decisions when selecting appropriate financial products for their portfolio. By calculating expected 1-year holding period returns prior to making any commitments, investors can ensure they select options that best suit their individual goals and risk tolerance levels while still maximizing potential profits over time.