Suppose you bought a 6.2 percent coupon bond one year ago for $900. The bond sel

ID: 2706803 • Letter: S

Question

Suppose you bought a 6.2 percent coupon bond one year ago for $900. The bond sells for $930 today.

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

b. What was your total nominal rate of return on this investment over the past year?

If the inflation rate last year was 2 percent, what was your total real rate of return on this investment?

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

2Suppose you bought a 6.2 percent coupon bond one year ago for $900. The bond sells for $930 today.

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

Answer : Total Dollar Return = 930-900 + 62 = $92

b. What was your total nominal rate of return on this investment over the past year?

Answer: Total Nominal rate of return = 92/900 = 0.1022 or 10.22%

If the inflation rate last year was 2 percent, what was your total real rate of return on this investment?

Answer : Total real rate of return = 10.22- 2 = 8.22%

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

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