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 Brenda’s investment has gained a greater percent return, and how much greater is it? (HINT: difference/original)
Answer
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.
Explanation
The bonds’ return was (101.345 − 96.562) ÷ 96.562 × 100 ≈ 4.95%. The stock’s return was (15.22 − 13.40) ÷ 13.40 × 100 ≈ 13.58%. Subtracting the returns gives 13.58% − 4.95% = 8.63 percentage points, so the stocks showed the greater return by 8.63 percentage points.
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