CH 6 Drill

Say you own an asset that had a total return last year of 16 percent. Assume the inflation rate last year was 4.2 percent.

Required:

What was your real return? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

2.

You purchase a bond with an invoice price of $1,150. The bond has a coupon rate of 11 percent, semiannual coupons, and there are three months to the next coupon date.

Required:

What is the clean price of the bond?

3.

The Timberlake-Jackson Wardrobe Co. has 11.5 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments.

Required:

If the bond currently sells for $1,136.78, what is its YTM?

4.

If Treasury bills are currently paying 5.75 percent and the inflation rate is 2.8 percent, what is the approximate and the exact real rate of interest? (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).)

Approximate_______________	%
Exact_______________________	%