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.

Solutions

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

Next > < Previous

Related Solutions

Three years ago you purchased a 11?% coupon bond that pays semiannual coupon payments for ?$963....

Three years ago you purchased a 11?% coupon bond that pays semiannual coupon payments for ?$963. What would be your bond equivalent yield if you sold the bond for current market price of ?$1057?? Your bond equivalent? yield, if you sold the bond for current market? price, is ------?%. ?(Round to two decimal? places.)

A bond with a face value of $1000 and maturity of exactly 20 years pays 10%...

A bond with a face value of $1000 and maturity of exactly 20 years pays 10% annual coupon. This bond is currently selling at an annual yield-to-maturity (YTM) of 12%. Answer the following questions for this bond. a. Calculate the current price of the bond by discounting all the cash flows of the bond using the timeline method. b. Calculate the modified duration of the bond without using any Excel built-in function. (calculate PV of each cash flow, find the...

Assume a bond matures for $1000 ten years and two months from today. It also pays...

Assume a bond matures for $1000 ten years and two months from today. It also pays semiannual coupons with an annual coupon rate of 8%. Calculate the dirty (cash) and clean prices of the bond if the bond’s yield to maturity equals 9%. (Show Work)

A bond has a $1000 par value and issued 5 years ago. The bond has 10...

A bond has a $1000 par value and issued 5 years ago. The bond has 10 years to maturity and an annual 8% annual coupon and sells for $990. i) Estimate the bond's current yield ii) Estimate the bond's yield-to-maturity iii) Explain the relationship of the bond price and its yield (Please explain the answer in detail, thank you)

One year ago you purchased a 8-year, 8% coupon bond. Today, you sold the bond at...

One year ago you purchased a 8-year, 8% coupon bond. Today, you sold the bond at a YTM of 8%. If the current yield was 6.96%, what was your total return on this investment? Par value is $1000

Ten years ago you purchased for $1,200 a bond issued by the ASD Corporation. The bond...

Ten years ago you purchased for $1,200 a bond issued by the ASD Corporation. The bond had twenty years to maturity, a par value of $1,000, a 12% coupon, and paid interest semiannually. Since you had no immediate use for the interest payments, you deposited them in your savings account. For the first 5 years, your bank paid 2% compounded semiannually, but for the last 5 years you have earned 4% compounded semiannually. Tomorrow you will receive your 20th interest...

Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 10 years. (To keep...

Bond A pays $8,000 in 20 years. Bond B pays $8,000 in 10 years. (To keep things simple, assume these are zero-coupon bonds, which means the $8,000 is the only payment the bondholder receives.) Suppose the interest rate is 7 percent. Using the rule of 70, the value of Bond A is approximately _______ ,and the value of Bond B is approximately _______ .Now suppose the interest rate increases to 14 percent. Using the rule of 70, the value of Bond A is now...

Bond A pays $4,000 in 10 years. Bond B pays $4,000 in 20 years. (To keep...

Bond A pays $4,000 in 10 years. Bond B pays $4,000 in 20 years. (To keep things simple, assume these are zero-coupon bonds, which means the $4,000 is the only payment the bondholder receives.) Suppose the interest rate is 7 percent. Using the rule of 70, the value of Bond A is approximately ? , and the value of Bond B is approximately ? . Now suppose the interest rate increases to 14 percent. Using the rule of 70, the...

The following 10-year bond was purchased at issuance three years ago for $987.50 and will now...

The following 10-year bond was purchased at issuance three years ago for $987.50 and will now be sold at its market price of $1,003.00. This bond pays a coupon of $80 per year at the end of each year and is expected to continue to do so until maturity. Given the risk associated with this bond, its required yield is 9.8%. Therefore, the expected yield, E(r) on this bond for the next seven years is ______ and is considered ______________:...

1) a year ago you purchased a $1000 face value bond for $989. A year later...

1) a year ago you purchased a $1000 face value bond for $989. A year later you sold the bond for $981 after receiving a coupon payment for $53. What was your rate of capital gain? 2) A banker must earn at least a 4.8% return after expected inflation on short term loans. The inflation rate for the past 6 months has averaged 5.1%. The expected inflation rate for the next twelve months is 7.8%. Nominal interest rates for short...

Subjects