What will be the annual rate of return on the bond

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Reference no: EM131947273

Question: A bond with a face value of $1,000 has 10 years until maturity, carries a coupon rate of 8.0%, and sells for $1,200. Interest is paid annually.

a. If the bond has a yield to maturity of 10.0% 1 year from now, what will its price be at that time? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price $

b. What will be the annual 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 annual real 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.)

Real rate of return %

Reference no: EM131947273

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