Question: A five year US Treasury note is purchased for $ 1 0 0 0 0 and pays 7 % interest ( $ 7 0 0

A five year US Treasury note is purchased for $10000 and pays 7% interest ($700) each year for five years. At the end of year 5, in addition to the interest, the $10000 original payment is returned. Inflation is expectd to be 3% per year for the five-year period. Neglecting taxes, what is the nominal and real rate of return on the note?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

After having been asked to Estimate your company's cost of Equity capital, you gathered the following information " YTM On five - year US Treasury note = 0.024 Five - year average annual return on 5...

Q:

10 YEAR US TREASURY NOTE STRIKE CALL PUT SEP OCT DEC SEP DEC 13100 1'48 1'22 1'50 o'11 1'09 13150 1'22 1'33 o'17 o'26 0.45 0 58 1'10 1'24 141 13200 0'63 1'18 1'03 0 51 0'38 o'28 13250 0'44 o'39 1'29...

Q:

Please Solve Step by step on paper 16.19. A five-year U.S. Treasury note is purchased for $10,000 and pays 7% interest ($700) each year for five years. At the end of year 5, in addition to the...

Q:

[Term Structure of Interest Rates for Questions 16 to 19] Assume that you work in a investment bank. You are told that 1,2,3,4,5,8, and 10 year treasury strips (zero coupon bonds) are currently...

Q:

a) On January 1, 2012 you purchased a $1,000 par, 10 year U.S. Treasury note with as semiannual coupon rate of 3%. If the bond is currently trading at $945.50, what is its yield to maturity (YTM)? b)...

Q:

QUESTION: PLEASE ANSWER 1 AND 2 CHAPTER 10 1. What kinds of long term liabilities does the company report? Has there been any new long-term debt issued this year? 2. What are the stated interest...

Q:

QUESTION: PLEASE DO 1 2 AND 3 CHAPTER 12 1. What information is contained in the Statement of Cash Flows (SCF) that can help investors, creditors, and others? 2. Which activities are included in the...

Q:

QUESTION: PLEASE DO 5 AND 6 5. Calculate various measures as follows: a. accounts receivable turnover for the reporting year. b. days sales uncollected c. inventory turnover for the reporting year....

Q:

USG Corporation case study questions. Questions and cases are attached. Assignment In your analysis, you should address the following questions: 1) Review USG's business, it's past performance, and...

Q:

For question B, I don't know the differences between gradual parallel shifts and instantaneous parallel shifts in yield curves. And how to connect it with question C? I don't see the connection. In...

Q:

Future Value of an Investment Using the future value tables, solve the following. (Click here to access the time value of money tables to use with this problem.) Round your answers to two decimal...

Q:

List and define three technical knowledge and/or skills core competencies.

Q:

No - equity loans ( a k , a . 1 2 5 % loans and high LTV loans ) can be risky because of all but which of the following: they can be large and expensive interest rates are higher than on traditional...

Q:

A particle of mass m = 10Mev and charge is subjected to a one-dimensional potential 9 2 Mev ey(x) = 1-kx with k = 1 Study 2 fm the correction that energy levels undergo when the particle is subjected...