If the inflation rate was 31 percent over the past year


1. You bought one of Great White Shark Repellant Co.’s 10 percent coupon bonds one year ago for $770. These bonds make annual payments and mature 9 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 11 percent. If the inflation rate was 3.1 percent over the past year, what was your total real return on investment?

31.69%

33.17%

31.59%

39.87%

18.99%

2. A stock has an expected return of 12 percent, its beta is 1.3, and the expected return on the market is 10 percent. What must the risk-free rate be?

3.17%

3.33%

-1.00%

3.47%

3.50%

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Financial Management: If the inflation rate was 31 percent over the past year
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