You bought one of Rocky Mountain Manufacturing CO.s 8 percent coupon bonds one year ago for $1,028.50.

Question:

You bought one of Rocky Mountain Manufacturing CO.’s 8 percent coupon bonds one year ago for $1,028.50. These bonds make annual payments and mature nine years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent. If the inflation rate was 4.8 percent over the past year, what would be your total real return in investment?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...