You have a car loan with a nominal rate of 6.25 percent. With interest charged m

Question

You have a car loan with a nominal rate of 6.25 percent. With interest charged monthly, what is the effective annual rate (EAR) on this loan?

What is the price of a Treasury STRIPS with a face value of $100 that matures in 11 years and has a yield to maturity of 13.5 percent?

A Treasury STRIPS is quoted at 78.574 and has 4 years until maturity. What is the yield to maturity?

A stock had a return of 7.5 percent last year. If the inflation rate was 1.4 percent, what was the approximate real return?

Suppose you purchase a $1,000 TIPS on January 1,2013. The bond carries a fixed coupon of 2 percent. Over the first two years, semiannual inflation is 3 percent, 2 percent, 2 percent, and 2 percent, respectively. For each six-month period, calculate the accrued principal and coupon payment. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "" sign in your response.) Accrued Principal Coupon Payment First 6 months Second 6 months Third 6 months Fourth 6 months

Explanation / Answer

A stock had a return of 7.5 percent last year. If the inflation rate was 1.4 percent, what was the approximate real return?

Calculation of approximate real return:

Formula:

Real Return = ((1+ Normal rate ) / (1+inflation rate) )- 1

= ((1+7.5%) / (1+1.4%) )- 1

= (1.075 / 1.014) – 1

= 1.060158 – 1

= 0.0602

= 6.02%

Hence, approximate real return = 6.02%

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.