Chapter 12

#4

Calculating Return [Lo1] Suppose you bought a bond with an annual coupon of 7 percent one year ago for $970. The bond sells for $940 today

A. Assuming a $1,000 face value, what was your total dollar return on this investment over the past year?

B. What was your total nominal rate of return on this investment over the past year?

C. If the inflation rate last year was 3 percent, what was your total real rate of return on this investment?