The total nominal return on her investment

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1. Cecilia wants to purchase a bond that pays no coupon for the first 4 years. The bond will then make annual payments of $200 each year for 5 years, after which the bond will then make $300 annual payments in perpetuity. How much is this bond worth if the yield to maturity is 6%?

2. Emma purchased a designer purse five years ago for $60. Today she sold the purse for $100, and total inflation over the past five years was 10%. The total nominal return on her investment is _____ but the real return is only ______.

3. How much do you have to deposit today so that beginning 11 years from now you can withdraw $10,000 a year for the next 8 years (periods 11 through 18) plus an additional amount of $20,000 in the last year (period 18)? Assume an interest rate of 8 percent.

Reference no: EM132068606

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