Problem 5-13 During a period of severe inflation, a bond offered a nominal HPR of 87%...

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Problem 5-13 During a period of severe inflation, a bond offered a nominal HPR of 87% per year. The Inflation rate was 79% pe

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Answer 1

Answer #1

Nominal HPR = 87.00%
Inflation Rate = 79.00%

Answer a.

Real HPR = (Nominal HPR - Inflation Rate) / (1 + Inflation Rate)
Real HPR = (0.87 - 0.79) / (1 + 0.79)
Real HPR = 0.08 / 1.79
Real HPR = 0.0447 or 4.47%

Answer b.

Approximate HPR = Nominal HPR - Inflation Rate
Approximate HPR = 87.00% - 79.00%
Approximate HPR = 8.00%

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Answer 2

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Problem 5-13 During a period of severe inflation, a bond offered a nominal HPR of 87%...

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During a period of severe inflation, a bond offered a nominal HPR of 82% per year....

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Problem 5-13 During a period of severe inflation, a bond offered a nominal HPR of 87%...

Homework Answers

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