A bond has a yield to maturity of 9.51 percent. If the inflation rate is 2.2 percent, The real rate of return on the bond is 84.3%
Real Rate = (1+Nominal Rate) / (1+Inflation rate) - 1
= (1+0.0902) / (1+0.032) - 1
= 1.843023256 - 1
= 0.843023256 or 84.3%
- The annual percentage of profit made on an investment, after accounting for inflation, is the real rate of return. Since this is the case, the real rate of return accurately depicts the true purchasing power of a given sum of money over time.
- The amount of a nominal return that is real return can be determined by the investor by adjusting the nominal return to account for inflation.
- Investors who want to calculate real returns on their money or choose from a variety of investment options must also take into account the impact of other factors, such as taxes and investing fees, in addition to accounting for inflation.
- Real rates of return are lower than nominal rates of return, with the exception of periods of deflation or zero inflation.
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Answer:
Dollar return of US Bancorp = $7.69
Explanation:
A Dollar return of US Bancorp = $36.19 - $29.89 + $1.39 = $7.69
Total Dollar return of US Bancorp = $7.69 * 200 = $1,538
Percentage return of US Bancorp percentage return = ($7.69/$29.89) * 100 = 25.72%
B Dollar loss of Hilton Hotels = $13.12 - $13.31 = - $0.19
Total Dollar loss of Hilton Hotels = - $0.19 * 300 = - $57.00
Percentage loss of Hilton Hotels = (-$0.19/$13.31) * 100 = 1.43%
C Dollar return of Hilton Hotels = $34.90 - $24.11 + $0.16 = $10.95
Total Dollar return of Hilton Hotels = $10.95 * 250 = $2,737.50
Percentage return of Hilton Hotels = ($10.95/$24.11) * 100 = 45.42%
Answer:
EAR in first case 9.08%
Second case 8.42%
Explanation:
EAR in first case = 1.08 * 1.01 = 9.08%
In second case = 8/(1 - 0.05)= 8.42%
The second case has a higher EAR because the fee and interest rate is higher than in the second case.***
Answer:
$230,899
Explanation:
Calculation for what the equivalent present cost is for the first 5 years
Present cost of the repair work = 68,000 * (P/A, 6%,5) - 7,000 * (P/G, 6%,5)
Present cost of the repair work= 68,000 * 4.212364 - 7,000 * 7.934549
Present cost of the repair work= $230,898.90 Approximately $230,899
Therefore the Present cost of the repair work will be $230,899