To get Full credit, you must draw the time line and show your calculation. If you use a financial calculator, you should show how to enter a value into a financial calculator.

1. A $1,000 face value bond has a coupon rate of 7 percent, a market price of $989.40, and 10 years left to maturity. Interest is paid semiannually. If the inflation rate is 2.2 percent, what is the yield to maturity when expressed in real terms(rate)?