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A 3-Year fixed interest bond pays a coupon of 5% p.a., yearly in arrears and is redeemed at par. An investor purchases the 100 nominal
A 3-Year fixed interest bond pays a coupon of 5% p.a., yearly in arrears and is redeemed at par. An investor purchases the 100 nominal of the bond at 95. (1) Compute the effective annual rate. (2) If the value of the inflation index (I) over 3 years has the following behaviour: I(t=1)=104,I(t=2)=108.16 and I(t=3)=112.49 calculate the annual real rate of the bond. (3) Compute the accumulated value at T=5Y of the cash flows collected from the bond. Use as reference rate of the investement the effective annual rate previously estimated
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