Question

48. An investor purchased a $1000 face value bond for $925. The bond has an 8...

48. An investor purchased a $1000 face value bond for $925. The bond has an 8 percent coupon rate, paid annually, and matures in five years. The investor sold the bond one year later for $965, while the price level was increasing at 5 percent. Calculate the pre-tax real realized rate of return on the investment?

a. -.7%

b. 8%

c. 3%

d. 5%

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Answer #1

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