Homework Questions:

1C3: You are looking at an investment that makes quarterly payments and has an expected return of 9%. If you would like to earn $500 per quarter for the next 6 years, how much do you need to invest today?

2C4: What is the value of a 5-year zero-coupon bond that yields 4%?

3C5: Along with the crash in the real estate and financial markets, 2008 also was a period of above-average inflation. The inflation rate was 5.6% for the 12 months ending June 2008. At the same time, the yield of the US Treasury bond was at 4.53%. Did you notice that the real rate was negative? This means that an investment in a 30-year US Treasury Bond was not even yielding enough to cover the increase in prices. What was the real return on the 30-year T-bond during that time? (Convert your answer to a percent but enter numbers only in your response.)