Suppose you bought a 12 percent coupon bond one year ago for $830. The bond sell
ID: 2790949 • Letter: S
Question
Suppose you bought a 12 percent coupon bond one year ago for $830. The bond sells for $900 today.
Requirement 1: Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?
Options: 70, 194, 154, 207, 190
Requirement 2: What was your total nominal rate of return on this investment over the past year?
Options: 24.95%, 18.54%, 8.43%, 22.89%, 27.24%
Requirement 3: If the inflation rate last year was 6 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations.)
Options: 2.30%, 15.94%, 18.96%, 12.91%, 14.26%
Explanation / Answer
what was your total dollar return on this investment over the past year
=900-830+(1000*12%)
=190
the above is the answer
What was your total nominal rate of return on this investment over the past year
=(900-830+(1000*12%))/830
=22.8916%
=22.89%
the above is the answer
If the inflation rate last year was 6 percent, what was your total real rate of return on this investment
=((1+22.8916%)/(1+6%))-1
=15.94%
the above is the answer
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