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A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.7%, and sells for $1,130. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.3% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price 914 b. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Real rate of return %

A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.7%, and sells for $1,130. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.3% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price 914 b. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Real rate of return %

Essentials Of Investments
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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A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.7%, and sells for $1,130. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.3% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price 914 b. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return % c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Real rate of return
Transcribed Image Text:A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 7.7%, and sells for $1,130. Interest is paid annually. (Assume a face value of $1,000 and annual coupon payments.) a. If the bond has a yield to maturity of 10.3% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to nearest whole number.) Price 914 b. What will be the rate of return on the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Rate of return % c. If the inflation rate during the year is 3%, what is the real rate of return on the bond? (Assume annual interest payments.) (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Negative amount should be indicated by a minus sign.) Real rate of return
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