Assuming a $1,000 face value, what was your total dollar return on this investme

Question

Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

What was your total nominal rate of return on this investment over the past year? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

If the inflation rate last year was 4.2 percent, what was your total real rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

Explanation / Answer

a)coupon dollar return=7.7 percent of 1000=$ 77

Price change dollar return=$932-900=$32

Thus, Total dollar return=coupon dollar return+Price change dollar return=$ 77 + $32=$ 109

b) Total nominal rate of return=(Total dollar return/initial investment)=(109/900)=0.1211 or 12.11%

c)total real rate of return on this investment=((1+Total nominal rate of return)/(1+inflation rate))-1

=((1+.1211)/(1+.042))-1

=0.07591=7.59%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.