Calculating return on corporate bond

Question

Hi all. I hope this is an okay place to ask this:

Assume you find a corporate bond you want to invest in. You then invest in it below par several times over the years, and you also sell bits of your holdings above par. It then matures, and you get your remaining nominal amount back at par. You therefore have uneven cash flows. Let's assume the interest is fixed rate, although FRN can also come into play.

Question: What is the most correct and the most market-conform way to calculate annualised returns on the investment, in debt asset management, if you calculate the return for the investment in this bond, as a whole? Pooling all the cash flows, the buys, sells and coupons and the redemption.

I could divide it up per buy, as an individual investment, but that quickly becomes messy, particularly, how to get to ONE single return on the bond.

I could use IRR, but that would factor in the time value of money, and I am not sure that is the norm in debt asset management? The most common seems to be holding period returns, which then are annualised - but this method does not apply when I have multiple buys and sells in each paper.

I look forward to your help.

Best regards,

dlnvtl

owlknickers · Answer

I also have the same question as you. Hope to get an answer soon idle breakout