Show all work: The 10-year bonds of Mind Co. pay a 7% annual coupon, have a...
Show all work: The 10-year bonds of Mind Co. pay a 7% annual coupon, have a face value of $1,000, and currently trade at $897.25. The current rate of inflation is 5.5%. What is the real rate of return (exact or approximate) on these bonds?
Homework Answers
Calculating Yield to Maturity of Bond,
Using TVM Calculation,
I = [PV = -897.25, FV = 1,000, N = 10, PMT = 70]
I = 8.57%
Real Rate = (1.0857/1.055) - 1
Real Rate = 2.91%
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