Assuming a $1,000 face value, what was your total dollar return on this investme
ID: 2764275 • Letter: A
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 4.3 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).)
Suppose you bought a bond with a coupon rate of 8.3 percent one year ago for $906. The bond sells for $944 today.Explanation / Answer
Total dollar return = Selling price +coupon rate*face value-purchase price
=944+.083*1000-906
=121
Total nominal return = (Selling price +coupon rate*face value-purchase price)*100/purchase price
=(944+.083*1000-906)*100/906
=13.36%
Real return = ((1+nominal return)/(1+inflation rate)-1)*100
=((1+.1336)/(1+.043)-1)*100
=8.69%
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