1. What would you expect the nominal rate of interest to be if the real rate is 4.2 percent and the expected inflation rate is 7.1 ?percent?
The nominal rate of interest would be ___?%. ?(Round to two decimal? places.)
2. The Saleemi? Corporation's ?$1,000 bonds pay 6 percent interest annually and have 14 years until maturity. You can purchase the bond for ?$1,155.
a. What is the yield to maturity on this? bond?
b. Should you purchase the bond if the yield to maturity on a? comparable-risk bond is 3 ?percent?