What will be your real and nominal return

Assignment Help Finance Basics
Reference no: EM13256015

Suppose that you buy a two-year 8% bond at its face value.

a) What will be your nominal return over the two years if inflation is 3% in the first year and 5% in the second? What will be your real return?

b) Now suppose that the bond is a TIPS. What will be your real and nominal return?

 

Reference no: EM13256015

Questions Cloud

Find the value of the inductance : A series RCL circuit contains a 4.99-µF capacitor and a generator whose voltage is 11.6 V. At a resonant frequency of 1.20 kHz the power delivered to the circuit is 24.1 W. Find the value of the inductance
Why does the cost of equity increase with an increased : Why does the cost of equity increase with an increased use of debt in the capital structure?
Determine the emf of the solar cell : A solar cell generates a potential difference of 0.094 V when a 560 ? resistor is connected across it, and a potential difference of 0.14 V when a 1100 ? resistor is substituted. What are the emf of the solar cell
How many days are in the cash cycle : Harry Joiner, Inc. currently has an inventory turnover of 15.7, a payables turnover of 9.6, and a receivables turnover of 8.1. How many days are in the cash cycle?
What will be your real and nominal return : Now suppose that the bond is a TIPS. What will be your real and nominal return?
Find the maximum acceleration of the object : A 3.40-kg object is attached to a spring and placed on frictionless, horizontal surface. Find the maximum acceleration of the object
Determine the continuously compounded rate of interest : Determine the continuously compounded rate of interest which is equivalent to 5.00% per year compounded quarterly.
What is the difference in present value : You are going to receive $200,000 in 50 years. What is the difference in present value between using a discount rate of 15 percent versus using 5 percent?
What is the apparent weight of the pilot at given point : An airplane flies in a loop (a circular path in a vertical plane) of radius 150m . The pilot's head always points toward the center of the loop, What is the apparent weight of the pilot at this point

Reviews

Write a Review

Finance Basics Questions & Answers

  Star wall street trader is negotiating his 1st contract

A star Wall Street trader is negotiating his 1st contract. His opportunity cost is= 10%. He has been presented the 3 year contracts which are given below.

  Quarterly mortgage payment

If, over first year, there are quarterly repayments of $5 million on mortgage pool, how are the funds distributed.

  Iron company sells its irons

Suppose that discount rate is 10% each year, there is no possibility of repeat order, also Q will pay either in full or not at all.

  Global manufacturing

You are employed by a CPA firm that has an international client, Global Manufacturing, with home offices in a country in the European Union.

  Creation of a financial plan

Assignment overview This assignment has a management accounting orientation. It draws on management accounting topics that include budgeting, sensitivity analysis, cost volume profit analysis and decision-making.

  Computation of current yield of a bond

Computation of current yield of a bond and They have a 6-year maturity, an annual coupon of $85

  Margin required to hold a futures contract

The margin required to hold a futures contract is not a down payment but a form of security bond.  What will be your comments on this?

  Find the net proceeds from sale of the bond

Currently, Warren Industries can sell 15-year, $1,000-par-value bonds paying annual interest at a 12% coupon rate. As a result of current interest rates, the bonds can be sold for $1,010 each; flotation costs of $30 per bond will be incurred in th..

  What annual rate of return would have to have been earned

What annual rate of return would have to have been earned on the account over an 18-year period?

  Question on retirement planning

The following retirement problem is often used to illustrate Significant aspects of savings and compound interest - see what you can learn by working the problem.

  Minimizing the costs of shipping goods

A Corporation wishes to minimize the costs of shipping goods from production plants to warehouses near metropolitan demand centers, while not exceeding the supply available from each plant and meeting the demand from each metropolitan area.

  Semi strong form of efficient market hypothesis

How would I find the investor's profit on a short sale at $45 if covered at a price of $30 and determine the semi-strong form of the efficient market hypothesis?

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