Suppose you bought a 8.7 percent coupon bond one year ago for $910. The bond sel

Question

Suppose you bought a 8.7 percent coupon bond one year ago for $910. The bond sells for $952 today. Required: (a) Assuming a $1,000 face value, what was your total dollar return on this investment over the past year? Total dollar return $??? (b) What was your total nominal rate of return on this investment over the past year? (Do not include the percent sign (%). Round your answer to 2 decimal places. Total nominal rate of return ???% (c) If the inflation rate last year was 4.2 percent, what was your total real rate of return on this investment? (Do not include the percent sign (%). Round your answer to 2 decimal places. Total real rate of return ???%

Explanation / Answer

Hi, Please find the answers as follows: Part A =952 - 910 + 1000*.087 = 129 Part B = 129/910 = 14.18% Part C =With the help of Fisher equation, the real return has been calculated as follows: (1 + R) = (1 + r)(1+ h) R = (1.1418 / 1.042)

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