What is the realized real rate earned by the investor

Assignment Help Financial Management
Reference no: EM131059205

An investor received an 7 percent coupon rate last year on a $1000 bond purchased at par. The inflation rate during the year was 6 percent and is expected to be 8 percent next year. What is the realized real rate earned by the investor last year?

Reference no: EM131059205

Questions Cloud

Basic financial principles is that the value of any asset : One of the basic financial principles is that the value of any asset (whether it be a stock, a bond, or a firm as a whole) is the present value of that asset’s future cash flows. As you learned in this chapter, finding present values requires determi..
Decide between two different conveyor belt systems : Eads Industrial Systems Company (EISC) is trying to decide between two different conveyor belt systems. System A costs $538,000, has a 4-year life, and requires $133,000 in pretax annual operating costs. The tax rate is 34 percent and the discount ra..
Find the time elapsed before the block b separates from a : Find the time elapsed before the block B separates from A.
Look at the focus on ethics box : Look at the Focus on Ethics box (“How Fair Is Check Into Cash”) in Chapter 5 of the textbook. These, businesses quote an interest rate of 15% to loan customers (most of whom are fairly unsophisticated) and yet the EAR of the loan is close to 400%. Ex..
What is the realized real rate earned by the investor : An investor received an 7 percent coupon rate last year on a $1000 bond purchased at par. The inflation rate during the year was 6 percent and is expected to be 8 percent next year. What is the realized real rate earned by the investor last year?
Is it ethical to discontinue the cash dividend : Mark Remington, the president and CEO of Earth Systems, Inc., a waste management firm, was recently hospitalized, suffering from exhaustion and a heart ailment. Mr. Jackson’s suggestion ethical? Explain. Is it ethical to discontinue the cash dividend..
Annual inflation rates have been forecast : The following annual inflation rates have been forecast for the next 5 years Year 1, 3% inflation, Year 2, 4% inflation, Year 3. 6% inflation, Year 4. 7%,year 5, 8 inflation Use the average annual inflation rate and 2 percent real rate to calculate t..
Determine force that you need to exert on front : Determine the force that you need to exert on the front of the refrigerator at the start of its tipping. You push horizontally 1.5 m above the floor.
Requires an initial fixed asset investment : Cochrane, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.7 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be wor..

Reviews

Write a Review

Financial Management Questions & Answers

  What is conundrums expected current share price

Conundrum Mining is expected to generate $12 million, $18 million, $22 million and $26 million in free cash flows over the next four years, after which they are expected to grow at a rate of 5% per year. If the weighted average cost of capital is 12%..

  Associated breweries is planning to market unleaded beer

Associated Breweries is planning to market unleaded beer. To finance the venture, it proposes to make a rights issue with a subscription price of $10. One new share can be purchased for every two shares held. The company currently has outstanding 140..

  What is the current ratio-what is the quick ratio

Ball Jar has net working capital of $2,710, current liabilities of $3,950, and inventory of $3,420. What is the current ratio? What is the quick ratio?

  Per month to spend on a car payment

You have $350.00 per month to spend on a car payment. If your credit union charged 7.5% interest on a used car, how much car can you purchase if you will only finance for 4 years?

  Markets required rate of return remains constant

Cayman’s Crafters is also considering issuing new shares of common stock. Their investment banker has advised them that it is a good time to sell and that the market’s required rate of return on similar securities is currently 8.5%. What price will y..

  Effects of the experimental treatment are observed is called

The variable upon which the effects of the experimental treatment are observed is called the _____variable.

  How much will earnings grow over the year

A firm is financing its growth with retained earnings. It is retaining 80 percent of its annual earnings. The firm's historic return on equity is 16 percent, a figure that is expected to continue into the future. How much will earnings grow over the ..

  What is the required rate of return on MNC stock

Midsouth Chemical has a beta of 0.85. The risk-free rate of interest is 3.5%, and the return on an average stock is 6.4%. What is the required rate of return on MNC stock?

  Explain what would be the amount of the equity

Based on your answer in (c), what would be the amount of the equity up front that you would have to give up in order to obtain LipLife's original venture capital investment?

  What is the initial weighted average cost of capital

The McGee Corporation finds it is necessary to determine its marginal cost of capital. McGee’s current capital structure calls for 40 percent debt, 30 percent preferred stock, and 30 percent common equity. What is the initial weighted average cost of..

  How much can you withdraw each year in your retirement

You are planning your retirement in 10 years. You currently have $172,000 in a bond account and $612,000 in a stock account. You plan to add $6,800 per year at the end of each of the next 10 years to your bond account. How much can you withdraw each ..

  Compute post-stock dividend price of complex computers stock

Show the company's common stockholders' equity after the stock dividend. Calculate the post-stock dividend price of Complex Computers stock, assuming no other changes occur.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd