1- A 10-year bond paying 10% coupon semi-annually is selling for $1342.61. What is the yield demanded by investors?

2- If the expected inflation rate is 6% and the real rate is 3%, what should be the nominal rate of a risk-free government bond?

3- An investor purchases at the beginning of the year a 5-year IBM bond paying a coupon of 6% and yielding 6%. She sells it at the end of the year when the yield had increased to 8%. What is her one year rate of return?

Answer rating: 100% (QA)

1 To calculate the yield demanded by investors on the 10year bond paying 10 coupon semiannually we can use the following formula PV C x 1 11rn r FV1rn ... View the full answer