Angelo purchased a 7% annual coupon bond one year ago for $987. At the time of purchase, the bond had six years to maturity. Over the past year inflation has been 3.2%. The market required return on this bond today is 8%. If Angelo sells the bond today at the market price, what real rate of return will he realize on this investment?
You purchased a five-year 6% annual coupon bond one year ago for $990. You sold the bond today when the market rate of return is 4.5%. If the inflation rate for the past year was 2.0%, what nominal rate of return did you earn on this investment?