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Determine the nominal interest rate that the bank

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Question 1. Consider a coupon bond that has a $1,000 par value and a coupon rate of 10%. The bond is currently selling for $1,044.89 and has two years to maturity. What is the bond's yield to maturity?

Question 2. QY wants to take out a loan, and LY wants to charge him an annual real interest rate equal to 2%. Assuming that the annualized expected rate of inflation over the life of the loan is 1%, determine the nominal interest rate that the bank will charge him. What happens if, over the life of the loan, actual inflation is 1.5%?

 

Reference no: EM133512393

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