A 10-year, 12% coupon bond with a par value of $1,000. At the time of issue of the bond the inflation rate in the country was 8% and investors were looking for a compensation of 4% spread. After some time the inflation increased to 9%. If the investors would like to have the same real rate of return, what would be the expected rate of return? uAs per the revised expected rate of return, what would be the price for the bond?

Answer rating: 100% (QA)

To calculate the expected rate of return we first need to calculate the nominal rate of return requi... View the full answer