Answer:
1. $80
2. 8.69%
3. 5.53%
Step-by-step explanation:
The computation is shown below:
1. Total dollar return
= Face value × interest rate + (Sale value - purchase value)
= $1,000 × $60 + ($940 - $920)
= $60 + $20
= $80
2. Total nominal rate of return equal to
= {Face value × interest rate + (Sale value - purchase value)} ÷ {Purchase value} × 100
= {$1,000 × $60 + ($940 - $920)} ÷ {$920} × 100
= ($60 + $20) ÷ ($920) × 100
= 8.69%
3. Total real rate of return is
= (1 + Nominal rate of return) ÷ (1 + Inflation rate) × 100
= (1 + 8.70%) ÷ (1 + 0.03) × 100
= 5.53%
