You purchased a bond 10 years ago for $771. Today, the bond pays you $1000. Over...

You purchased a bond 10 years ago for $771. Today, the bond pays you $1000. Over the same period, overall inflation is 25%.

The nominal rate of return for the bond is ________ percent. 2 decimal places answer please.

Expert Solution

The nominal rate of return is the rate which ignores the impacts of taxes and inflation. It can be calculated as:

Nominal rate of return = (Present Market value - Original investment value) / Original Investment value

We have, Original investment value = $771 and Present market value = $1,000

Nominal rate of return will be = (1000-771) / 771

Nominal rate of return = 29.70%

Rahul Sunny answered 2 years ago

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