You just learned that a well-established company will issue a bond with a matu-rity of 100 years. The bond appears to be a good deal because it yields 10.71 per-cent. Assuming that the inflation rate stays at 3.34 percent, what is the bond’s real rate of return today? If you are looking for a bond to purchase and hold for several years, will you buy this bond? Explain your answer in terms of future inflation projections and the length of the bond’s maturity.

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06-11-2022
Business

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You just learned that a well-established company will issue a bond with a matu-rity of 100 years. The bond appears to be a good deal because it yields 10.71 per-cent. Assuming that the inflation rate stays at 3.34 percent, what is the bond’s real rate of return today? If you are looking for a bond to purchase and hold for several years, will you buy this bond? Explain your answer in terms of future inflation projections and the length of the bond’s maturity.

Sagot :

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