Question
Consider a 10-year real discount bond with a real yield of 2.5%. The face value of the bond is $1, 000 and the current value
Consider a 10-year real discount bond with a real yield of 2.5%. The face value of the bond is $1, 000 and the current value of the CPI is 1, 000.
(a) What is the nominal and real price of this bond today.
(b) Suppose the annualized inflation rate turns out to be 3%.
What is the TIPS inflation index ratio? What is the adjusted principal? What is the realized nominal HPR? What is the realized real HPR?
(c) Suppose the annualized inflation rate turns out to be 7%. What is the TIPS inflation index ratio? What is the adjusted principal? What is the realized nominal HPR? What is the realized real HPR?
(d) What is the nominal yield of a nominal 10-year discount bond when the expected inflation rate is 5% and there is no inflation risk premium?
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Investing In Justice An Introduction To Legal Finance Lawsuit Advances And Litigation Funding
Authors: Max Volsky
1st Edition
0988510502, 978-0988510500
