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You just learned that a blue chip company will issue a bond with a maturity of 100 years. The bond appears to be a good
You just learned that a blue chip company will issue a bond with a maturity of 100 years. The bond appears to be a good deal because it yields 8.56 percent. Assuming that the inflation rate stays at 3.34 percent, what is the bond's real rate of return today? If you are looking for a bond to purchase and hold for several years, will you buy this bond? Explain your answer in terms of future inflation projections and the length of the bond's maturity Assuming that the inflation rate stays at 3.34 percent, what is the bond's real rate of return today? (Select the best answer below.) O A. The bond's real rate of return is 5.22 percent. Only a long-term investor would purchase this bond. If inflation were to increase, the value of this bond would decrease. The dramatic decrease in the value of the bond would be as a result of its sensitivity to changes in interest rates due to its long maturity. O B. The bond's real rate of return is 5.22 percent. Only the most risk-tolerant investor would purchase this bond. If inflation were to increase, the value of this bond would increase. The dramatic increase in the value of the bond would be as a result of its sensitivity to changes in interest rates due to its long maturity. O C. The bond's real rate of return is 5 percent. Only the most risk-tolerant investor would purchase this bond. If inflation were to increase, the value of this bond would decrease dramatically. The dramatic decrease in the value of the bond would be as a result of its sensitivity to changes in interest rates due to its long maturity
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