1. [5 points] Rejean purchased a 13 year 4.6 percent real return bond. a) If investments with comparable risk have 5% return, what is the price of this bond? [2 Points] b) If the CPI has increased by 1.5 percent in the first year. What interest payment will Rejean receive in the second year? [3 Points] Annuity Factor using the YTMn 1 1 I FV P = CPN X YTM. (1-(1 + YTM,)n) + (a1 + YTM,)n) Present Value of all of the periodic coupon payments Present Value of the Face Value repayment using the YTM71 (Face Value 1 Coupon Rate x Face Value CPN =; Number of Coupon Payments per Year Inflation-adjusted FV = CPI increase x FV 1+ YTMn = Price ) Inflation-adjusted Coupon = Inflation- adjusted FV x Coupon Rate