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You bought one of Mastadon Manufacturing Co.’s 5.6 percent coupon bonds one year ago for $1,051....

You bought one of Mastadon Manufacturing Co.’s 5.6 percent coupon bonds one year ago for $1,051. These bonds make annual payments, mature ten years from now, and have a par value of $1,000. Suppose you decide to sell your bonds today, when the required return on the bonds is 4.5 percent. If the inflation rate was 4.2 percent over the past year, what would be your total real return on the investment? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Total real return %

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Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum ー E ゴWrap Text ta copy ▼ B า 프 . Ej-., Δ. : r_一 逻锂函Merge & Center. $, % , 弼,8 conditional Format . Cell Insert Delete Format Paste Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. Styles ▼ ㆆ ▼ Clipboard FU117 FR Font Alignment Number Cells FS FT FU FV FW FX FY FZ GA GB GC GD GE GF 101 102 103 104 105 106 107 108 109 110 PURCHASE PRICE FACE VALUE LIFE YTM PRICE TODAY $ 1,051 1,000 10 4.50% YEARS $ 1,087.04 EXCEL-PV(4.5%, 10,-56,-1000) RETURN-(P1 + C1-PO)/PO P1 C1 PO 8.7574% 1,087.04 $ 56 $ 1,051 112 113 114 115 ANSWER REAL RETURN= 116 (1 +RETURN)/(1+INFLATION RATE) 1 (1+0.087574)/1+0.042)-1 REAL RETURN REAL RETURN- 4.37% 118 YIELD SPOT Sheet2 AFN BANKING NOTE BIDDING, UNDERWRITING EUAC AW PM LIFE LP I MRP INFLATION YIELD WARRANT fund bond CLEAN INVOICE PRICE LI 福 130% 04-01-2019

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