Assume that a bank is providing a company with a loan of P500,00 for one year at a real rate of interest of 6 per cent. At the end of the year it expects to receive back P530,000 of purchasing power at current prices. However, if the bank expects a 12 per cent rate of inflation over the next year, it will want P593,600 back. What would be the interest rate required by the bank?


2.Assume investor requires a 6 percent annualized return on a 90 day Treasury bill with a P1,500,000 par value. The price of the security will be?

3.If a P100,000 face-value discount bond maturing in one year is selling for P50,000, then its yield to maturity is?

Answer rating: 100% (QA)

1 To calculate the interest rate required by the bank we can use the concept of real interest rate a... View the full answer