Suppose you bough; a 6.8 percent coupon bond one year ago for $890. The bond sel

Question

Suppose you bough; a 6.8 percent coupon bond one year ago for $890. The bond sells for $925 today. Assuming a $1.003 face value, what was your total dollar return on this investment over the past year? What was your total nominal rate of return on this investment over the past year? (Round your answer to 2 decimal places, (e.g., 32.16)) If the inflation rate last year was 3 percent, what was your total real rate of return on this investment9 (Round your answer to 2 decimal places, (e.g.. 32.16))

Explanation / Answer

a)Total dollar return=(925-890)=$35

b)Nominal return=(925-890)/890=3.93%

c)(1+nominal)=(1+real)*(1+inflation)

real=[(1+3.93%)/(1+3%)]-1

=0.91%

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