Compute the annual rate on the real bond

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Reference no: EM131819177

Consider these long-term investment data:

The price of a 10-year $100 par zero coupon inflation-indexed bond is $84.49.

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.

b. Compute the CC annual risk premium on the real-estate investment.

c. Use the appropriate formula and Excel Solver or Goal Seek to find the SD of the annual excess return on the real-estate investment.

d. What is the probability of loss or shortfall after 10 years?

There is no additional info given in the textbook: Investments, 10th edition, by Bodie/Kane/Marcus.

Reference no: EM131819177

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