Problem 1. AR store issued 15 year bonds one year ago at a coupon rate of 6.1%. The bonds make semi-annual payments. If the YTM on these bonds is 5.3%, what is the current bond price?
Problem 2. NH Co. issued 15 year bonds two years ago at a coupon rate of 8.4%. The bonds make semi-annual payments. If these bonds currently sell for 108% of par value, what is the YTM?
Problem 3. Ozzy Corp. has bonds on the market with 10.5 years to maturity, a YTM of 9.4%, and a current price of $945. The bonds make semi-annual payments. What must the coupon rate be on the bonds?
Problem 4. If the treasury bills are currently paying 5.7% and the inflation rate is 2.9%, what is the approximate real rate of interest? The exact real rate?
Problem 5. Suppose the real rate is 3.2% and the inflation rate is 2.6%. What rate would you expect to see on a Treasury bill?
Problem 6. An investment offers a 13% total return over the coming year. Bill B. thinks the total real return on this investment will be only 7%. What does Bill believe the inflation rate will be over the next year?
Problem 7. Say you own an asset that had a total return last year of 17%. If the inflation rate last year was 3.2%, what was your real return?