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Problem #2 - Interest Rates and Bond Valuation a) Using the following information: $1,000 par value, 11% yield, coupon payment of $100 annually, 10 years to maturity: 1) Calculate the price of the bond 2) If the coupon rate is 8%, calculate the yield to maturity b) Using the Fisher equation, what is the nominal interest rate if the real rate of interest is 4% and the rate of inflation is 9%2

Problem #2 - Interest Rates and Bond Valuation a) Using the following information: $1,000 par value, 11% yield, coupon payment of $100 annually, 10 years to maturity: 1) Calculate the price of the bond 2) If the coupon rate is 8%, calculate the yield to maturity b) Using the Fisher equation, what is the nominal interest rate if the real rate of interest is 4% and the rate of inflation is 9%2

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
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Problem #2 - Interest Rates and Bond Valuation a) Using the following information: $1,000 par value, 11% yield, coupon payment of $100 annually, 10 years to maturity: 1) Calculate the price of the bond 2) If the coupon rate is 8%, calculate the yield to maturity b) Using the Fisher equation, what is the nominal interest rate if the real rate of interest is 4% and the rate of inflation is 9%?
Transcribed Image Text:Problem #2 - Interest Rates and Bond Valuation a) Using the following information: $1,000 par value, 11% yield, coupon payment of $100 annually, 10 years to maturity: 1) Calculate the price of the bond 2) If the coupon rate is 8%, calculate the yield to maturity b) Using the Fisher equation, what is the nominal interest rate if the real rate of interest is 4% and the rate of inflation is 9%?
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