If the current inflation rate is 42 and you are earning a

Question

1. If the current inflation rate is 4.2% and you are earning a real rate of return on an investment of 3.8%, then the nominal rate on this investment is closest to:

• 3.8%
• 4.2%
• 8.0%
• 8.2%

2. If an investment providing a nominal return of 12.25% only offers a real rate of return of 5.70%, then the inflation rate is closest to:

• 5.70%
• 6.20%
• 6.55%
• 12.25

3. Suppose a five- year bond with a 7% coupon rate and semiannual compounding is trading for a price of $951.58. Expressed as an APR with semiannual compounding, this bonds yield to maturity (YTM) is closest to:

• 7.0%
• 7.5%
• 7.8%
• 8.2%

4. Use the following information to answer the question(s) below. A default-free security has an annual coupon rate of 3.25% and sells for par. This bond will mature in:

• 1 year
• 2 years
• 3 years
• 4 years