A $1,000 face value bond currently has a yield to maturity of 6.75% percent. The bond matures in 8 years and pays interest annually. The coupon rate is 7.5 percent. What is the current price of this bond?
A. $1,000.00
B. $1,045.22
C. $1,072.50
D. $1,060.25
E. $1,035.48
2. Libby Jordan, a management trainee at a large Boston-based bank is trying to estimate the real rate of return expected by investors. He notes that the 3-month T-bill currently yields 6 percent and has decided to use the consumer price index as a proxy for expected inflation. What is the estimated real rate of interest if the CPI is currently 2 percent?
A. 6%
B. 4%
C. 3%
D. 5.3%
E. 3.5%