Relationship between real and nominal rates

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1. HexChat, Inc. has issued 16 year bonds 5 years ago. The bonds pay semiannual coupons, with a coupon rate of 3.3 percent, and $1000 face value. If your required return on this investment is 7.1 percent APR, how much would you be willing to pay for this bond?

2. Last year, you earned a rate of return of 8.58 percent on your bond investments. During that time, the inflation rate was 3.69 percent. What was your real rate of return? Use the exact relationship between real and nominal rates. Enter answer in percents, accurate to two decimal places.

Reference no: EM132007469

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