1. The interest rate is 8.7% p.a. effective and the rate of inflation is 1% p.a.Compute the real rate of interest数字%Enter a percentage correct to 2 decimal places.2. A Zero-Coupon Bond, with face value £100, that reaches maturity in 5 years sells for £75. The inflation rate is 1% p.a. effective.What is the real yield?数字%Enter a percentage correct to 2 decimal places.

answer is in the explanation sectionExplanation:1. Real Rate of Interest = Nominal Interest Rate -…

Answered: 1. The interest rate is 8.7% p.a.…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Suppose a 10% 3years bond with a FV of $1000 Spot rates r1= 10%, r2= 12%, r3=13%. Calculate the forward rate required to calculate the bond price using the forward rate 1f2
Suppose that the continuously compounded zero rates are listed in the table below: Maturity (Months) Zero Rate (%) 6 2 12 2.8 18 3.3 24 3.6 30 4.4 Estimate the price of a bond with a face value of $100 that will mature in 30 months and pays a coupon of 6% per annum semiannually. (Required precision: 0.01 +/- 0.01)
Required: a. Find the duration of a 3% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6.1% (Do not round intermediate calculations. Round your answers to 4 decimal places.) b. What is the duration if the yield to maturity is 101% ? (Do not round intermediate calculations. Round your answers to 4 decimal places.) YTM a 61% YTM b. 10.1% YTM Duration Years Years
Consider the following: Price Yield to maturity Periods to maturity Modified duration Fixed-rate Bond Fixed-rate Note 107.18 5.00% 18 6.9848 100.00 5.00% 8 3.5851 a. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate note. Show your work. b. For an increase in interest rates of 100 basis points, determine the change in value for the fixed-rate bond. Show your work. c. Which of the two fixed-rate securities are more sensitive to increases interest rates? Why? d. What would be the most appropriate course of action to take given interest rates are expected to rise? Explain carefully.
5-year Treasury bonds yield 8.0%. The inflation premium (IP) is 2.66%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.56%. There is no liquidity premium on these bonds. What is the real risk-free rate, r*? r as a percent and round your answer to two decimal places)
AT - Bill that is 225 days from maturity is selling for $98, 850. The T. Bill has a face - value of $ 100,000 (LG 5 - 2) Calculate the Discount Yield on the T. Bill. Calculate the Bond Equivalent Yield on the T Bill. Calculate the EAR (Equivalent Annual Return) on the T. Bill. What would the Bond Equivalent Yield be, if all other factors remain the same, but the T. bill has a maturity of 300 days. B
12. Suppose that you buy a 1-year maturity bond for $1,000 which is a real return bond with a coupon rate of 4%. What will the cash flow provided by the bond be for each of the four inflation rates? What will be the real and nominal rates of return on the bond in each scenario? (Do not round intermediate calculations. Round your answers to 2 decimal places.) a. The inflation rate is 2%. b. The inflation rate is 4%.
The outstanding bonds of CEPS Group provide a nominal yield to maturity of 7.19 percent. The real rate of return is 3.71 percent. What is the rate of inflation?
What is the discount yield, bond equivalent yield, and effective annual return on a $1 million Treasury bill that currently sells at 93.375 percent of its face value and is 70 days from maturity? (Use 360 days for discount yield and 365 days in a year for bond equivalent yield and effective annual return. Do not round intermediate calculations. Round your percentage answers to 3 decimal places. (e.g., 32.161)) Discount yield Bond equivalent yield Effective annual return % % %
Zero-Coupon Bonds (ZCBS) with maturity in 1 and 5 years are available on the market. Their redemption value is £100, and they sell for £90 (1-year ZCB) and £84 (5-year ZCB). Find the spot rates corresponding to the ZCBs' prices 数字 i1 = % i5 数字 Enter a percentage correct to 2 decimal places % Calculate the forward rate 1,5 i1,5 数字 Enter a percentage correct to 2 decimal places %
What is the real interest rate given a nominal rate of 8.7% and an inflation rate of 1.5%? A. 11.3% B. 8.5% C. 7.1% D. 9.9%
K Using the formula given below: F-P P if the market price of a $1,000-face-value discount bond changes from $925 to $950, the yield to maturity decreases by%. (Round your response to two decimal places.) Rbonds =

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