Answered

Welcome to Westonci.ca, where you can find answers to all your questions from a community of experienced professionals. Explore our Q&A platform to find in-depth answers from a wide range of experts in different fields. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

Suppose that you buy a two-year 7.4% bond at its face value. a-1. What will be your total nominal return over the two years if inflation is 2.4% in the first year and 4.4% in the second?

Sagot :

Answer: 15.35%

Explanation:

The total nominal return over the two years if inflation is 2.4% in the first year and 4.4% in the second year will be calculated thus:

= (1+Interest rate)² -1

= (1 + 7.4%) - 1

= (1 + 0.074)² - 1

= 1.074² - 1

= 1.153476 - 1

= 0.153476

= 15.35% over the two years

Thanks for using our platform. We're always here to provide accurate and up-to-date answers to all your queries. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Get the answers you need at Westonci.ca. Stay informed with our latest expert advice.