Question
1.You own an investment that had a total (nominal) return of 13.5%last year.Assume the inflation rate was 4.2%, calculate the real rate of return on
1.You own an investment that had a total (nominal) return of 13.5%last year.Assume the inflation rate was 4.2%, calculate the real rate of return on the investment using the Exact Fisher Equation. (Enter percentages as decimals and round to 4 decimals)
2.Suppose you are given the following information about U.S. Treasury Notes:
A 5-year T-NOTE has a yield to maturity of 3.5%
A 10-year T-NOTE has a yield to maturity of 4.2%
Suppose you are given the following information about U.S. TIPS Notes:
A 5-year TIPS has a yield to maturity of 1.2%
A 10-year TIPS has a yield to maturity of 1.35%
Calculate the 10-year break-even inflation rate using the approximate Fisher Equation. (Enter percentages as decimals and round to 4 decimals)
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Financial Management Theory and Practice
Authors: Eugene F. Brigham, Michael C. Ehrhardt
16th edition
1337902608, 978-1337902601
