2a. Ngata Corp. issued 18-year bonds 2 years ago at a coupon rate of 10.6 percent...

2a. Ngata Corp. issued 18-year bonds 2 years ago at a coupon rate of 10.6 percent (APR). The bonds make semiannual payments. If these bonds currently sell for 97 percent of par value, what is the YTM (as an APR)?

2b. Ashes Divide Corporation has bonds on the market with 14 years to maturity, a YTM of 6.4 percent (APR), and a current price of $1,176.50. The bonds make semiannual payments. What must the coupon rate be on these bonds (as an APR)? Note: first find the semi-annual payment. Then convert it into an annual payment and use this annual payment to find the coupon rate as an APR. (Do not round your intermediate calculations.)

2c. Suppose the real rate on your investment is 9.5 percent and the inflation rate is 2.2 percent. What nominal rate would you expect to see on your investment? Use the Fisher Effect Formula.

2d. An investment offers a 13.0 percent total return over the coming year. Bill Bernanke thinks the total real return on this investment will be only 4.5 percent. What does Bill believe the inflation rate will be over the next year? Use the Fisher Effect Formula.

2e. Say you own an asset that had a total return last year of 16 percent. If the inflation rate last year was 3 percent, what was your real return? Use the Fisher Effect Formula.

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