20.00 points A portfolio manager invested $2.000.000 in bonds in 2007 In one yea

Question

20.00 points A portfolio manager invested $2.000.000 in bonds in 2007 In one year the market value of the bonds dropped to $1.983,000. The interest payments during the year totaled $112.000 a. What was the manager's total rate of return for the year? (Round your answer to 2 decimal places) total rate of return for the year? (Round your answer to 2 decimal places) Total rate of ret b. What was the manager's real rate of return if the inflation rate during the year was 26%? Round your answer to 2 decimal places.) Real rate of return

Explanation / Answer

a) Inv amount = 2000000

Interest he got = 112000

So, he owns now = 1983000 + 112000 = 2095000

Return = ( 2095000 - 2000000) * 100/2000000 = 4.75%

b) Real rate of return = 4.75% - 2.6% = 2.15%

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