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1. What are the distinguishing features of an index-linked bond? How are the values of the coupon and principal determined? 2. Distinguish between Current yield
1. What are the distinguishing features of an index-linked bond? How are the values of the coupon and principal determined?
2. Distinguish between Current yield and Yield to Maturity. How useful are these measures of return?
3. Calculate the Current yield and Yield to Maturity for a bond with a coupon of 10% semi-annually maturing in 3 years with a market price of 102.
4. Distinguish between the real interest rate and the nominal interest rate. What is the real interest rate if inflation is currently 6% and the nominal interest rate is 4%?
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