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Question: 1 a year ago you purchased a 1000 face value...

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1) a year ago you purchased a $1000 face value bond for $989. A year later you sold the bond for $981 after receiving a coupon payment for $53. What was your rate of capital gain?

2) A banker must earn at least a 4.8% return after expected inflation on short term loans. The inflation rate for the past 6 months has averaged 5.1%. The expected inflation rate for the next twelve months is 7.8%. Nominal interest rates for short term loans were 8.2% last month. What is the minimum nominal interest rate that he should charge for a one year loan?

3) A $5000 face value bond maturing in 4 years has a coupon rate of 4.1 percent. What is the coupon payment?

4) A $1080 face value bond is selling in the market place for $926. It matures in 3 years. If keep to maturity, what is the bond's yield to maturity?

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