Compute the annual rate on real bond

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Reference no: EM131822513

1. Consider these long-term investment data:

• The price of a 10-year $100 par zero coupon inflation-indexed bond is $80.65.

• A real-estate property is expected to yield 2% per quarter (nominal) with a SD of the (effective) quarterly rate of 10%.

a. Compute the annual rate on the real bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. You have a chance to buy an annuity that pays $1,200 at the end of each month for 36 months. You could earn an annual nominal rate of 6.0% on your money in other investments with equal risk. What is the most you should pay for the annuity?

None of the above

$30,754

$26,369

$39,445

$27,757

Reference no: EM131822513

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