If you make an investment that earns 5% the first year,-60% the second year, 120

Question

If you make an investment that earns 5% the first year,-60% the second year, 120% the third year, and 7% the fourth year, what is your total 4-year return? Round your answer to the nearest tenth of a percent. A none of the choices 59.1% 72.0% If the nominal interest rate is 13%, and inflation is 4%, what is the real interest rate? A 8.7% 9.0% 12.5% D 9.9% Assume that the following data on U.S. Treasury securities is current: Years to maturity Yield to maturity 0.800% 091096 1.300% 1.350% 2.400% 2.560% 3.080% 4.200% 7 10 20 Refer to the information above. How much will a $1000 investment in 7-year Treasury notes return if the investment is held to maturity? Round your answer to the nearest $1. A $1,944 B $1,194 $1,227 D $1,141 Refer to the information above. What is the implied interest rate on a one- issued at the end of one year? A 6.71% 2.08% 0.30% D 1.02% year Treasury 4

Explanation / Answer

1 LET X AMOUNT IS INVESTED

AMOUNT IN THE IN END OF 4TH YEAR = X(1+5%)*(1-60%)*(1+120%)*)(1+7%) = x98.86

SO TOTAL RETURN IN THE END OF 4TH YEAR WILL BE 98.86%

A IS THE RIGHT CHOICE

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