1. Consider these long-term investment data:
• The price of a 10-year $100 par zero coupon inflation-indexed bond is $80.65.
• A real-estate property is expected to yield 2% per quarter (nominal) with a SD of the (effective) quarterly rate of 10%.
a. Compute the annual rate on the real bond. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2. You have a chance to buy an annuity that pays $1,200 at the end of each month for 36 months. You could earn an annual nominal rate of 6.0% on your money in other investments with equal risk. What is the most you should pay for the annuity?
None of the above
$30,754
$26,369
$39,445
$27,757