Calculate the Yield to Maturity for the following assets:

a$.$ Simple Loan, whose price today is $$1,000$ and requires a payment of $$1,200$ in three

years.

b$.$ A coupon bond whose coupon rate is $10\%,$ today's price is $$1,000,$ and the face value

will be $$1,200$ in two years.

c$.$ Which option $($simple loan versus coupon bond$)$ would you prefer if you had $$1,000$

to invest? Why?

Imagine you pay $1,000$ for a coupon bond whose maturity is in $2$ years. The coupon rate is

$10\%,$ and the face value is $1,000.$

a$.$ Calculate the "Current Yield"

b$.$ After you receive the first payment, you realize that the interest used to discount

future payments has increased to $15\%.$ What is the new price of this bond?

c$.$ Calculate the rate of capital gain.

d$.$ Calculate the rate of return.

Imagine that you want to buy your first car. On January $1^{st}2024,$ you borrowed $$10,000$ and

you need to pay back $11,000$ on December ${31}^{st}2024.$

a$.$ If the GDP deflator was equal to $1$ in $2024$ when using $2023\text{'}$s prices, what is the real

interest rate?

b$.$ If the CPI increases from $100$ to $105$ in $2024,$ what is the real interest rate?

c$.$ Are you happier in part a$)$ or part b$)?$ Explain