In a high-inflation economy, a corporate bond provided a nominal HPR of 45% per year. The inflation rate during this period was 38% per year. Calculate the real HPR on the bond.
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- A 10-year government bond has face value of OR 200 and a coupon rate of 6% paid semiannually. Assume that the interest rate is equal to 8% per year. What is the bond’s price? What is the reason for the difference in price on an annual and semiannually basis? Discuss the role of financial managers.Financial accountingDuring a period of severe inflation, a bond offered a nominal HPR of 80% per year. The inflation rate was 70% per year.a. What was the real HPR on the bond over the year?b. Compare this real HPR to the approximation rreal ≈ rnom − i.
- The outstanding bonds of Winter Tires Inc. provide a real rate of return of 4.2 percent. If the current rate of inflation is 5.8 percent, what is the actual nominal rate of return on these bonds?A 5-year government bond has a face value of £1,000 and an annual nominal couponrate of 8%. Assume that the relevant nominal market interest rate (annualized) is equalto 10%. The coupon payments are made quarterly.(a) Calculate the present value of the bond and the effective market interest rate.During a period of severe inflation, a bond offered a nominal HPR of 86% per year. The inflation rate was 76% per year. a. What was the real HPR on the bond over the year? (Round your answer to 2 decimal places.) b. Find the approximation rreal ≈ rnom – i.
- A bond par value is $2,000 and the coupon rate is 6 percent. The bond price was $1,946.61 at the beginning of the year and $1,982.79 at the end of the year. The inflation rate for the year was 2.4 percent. What was the bond's real return for the year?If the real rate of interest is 2%, inflation is expected to be 3% during the coming year, and the default risk premium, illiquidity risk premium, and maturity risk premium for the Bonds-R-Us Corporation are all 1% each, what would be the yield (stated rate) on a Bonds-R-Us bond?Suppose Home Depot issues 30-year bonds on which it pays a 4.00% (nominal) interest rate. Further, suppose that both Home Depot and the purchasers of its bonds anticipate inflation will average 2.00% during the life of the loan. Now suppose the inflation rate after the loan is made (i.e. after the bond is purchased) is actually 1.00% per annum. It follows that the actual real rate of interest is and, ceteris paribus, are (is) better off than anticipated as a result of the difference between the anticipated and the actual rate of inflation. Select one: a. 2.00%, Bondholders b. 2.00%, Home Depot O c. 3.00%, Bondholders d. 3.00%, Home Depot
- . CEPS Group has bonds outstanding with a 9.24 percent nominal yield to maturity. The current rate of inflation is 1.75 percent. What is the real rate of return on these bonds?The real risk-free rate is 3 percent. Inflation is expected to average 2 percent a year for the next 3 years, after which the inflation is expected to average 3.5 percent a year. Assume that there is no maturity risk premium. A 7-year corporate bond has a yield of 7.6 percent. Assume that the liquidity premium on the corporate bond is 0.4 percent. What is the default risk premium on the corporate bond?A company's 5-year bonds are yielding 10% per year. Treasury bonds with the same maturity are yielding 3.9% per year, and the real risk-free rate (r*) is 2.15%. The average inflation premium is 1.35%, and the maturity risk premium is estimated to be 0.1 × (t - 1)%, where t = number of years to maturity. If the liquidity premium is 0.9%, what is the default risk premium on the corporate bonds? Round your answer to two decimal places. %