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6) Components of bond returns Given the following: Inflation 2.5% 1 Year Treasury Bill: 4% 10 Year Treasury Bond: 5.5% 30 Year Treasury Bond: 6%

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6) Components of bond returns Given the following: Inflation 2.5% 1 Year Treasury Bill: 4% 10 Year Treasury Bond: 5.5% 30 Year Treasury Bond: 6% Amazon 10 Year Bond: 8% Apple 10 Year Bond: 7% Amazon 10 Year convertible bond: 2% J&J 30 Year Bond: 7.5% J&J 10 Year Callable Bond: 7.3% 6a) What is the risk free real rate of return? Write down and identify the Fisher Equation as part of your answer 6b) What is the shape of the yield curve? What is the maturity premium for a 10 year bond compared to a 1 year? What is the maturity premium for a 30 year bond? 6c) What is the credit risk premium associated with Amazon? With Apple? With J&J? 6d) What is the special provision premium associated with the Amazon convertible bond? What is the special provision premium associated with the J&J callable bond? What are a convertible and a callable bond? would be the nominal rate of return on a 10 year bond with a credit risk premium of 2% and no special features? 6e) If the real rate of return stayed constant, and inflation increased to 4%, what

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