1. a)Rejean purchased a 13-year 4.6 percent real return bond. If investments with comparable risk have 5% return, what is the price of this bond? b)If the CPI has increased by 1.5 percent in the first...

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1. a)Rejean purchased a 13-year 4.6 percent real return bond.
If investments with comparable risk have 5% return, what is the price of this bond? b)If the CPI has increased by 1.5 percent in the first year. What interest payment will Rejean receive in the second year?
2.The inclusion of real return bonds in the federal government's financing requirements has made them very attractive. Discuss all of the features of a real return bond. What risk is attached to a 25-year real return bond yielding 4 percent?
3.A mutual fund has a beginning balance of $90 million, earns interest of $12 million, receives dividends of $15 million, and has expenses of $5 million. If 10 million shares are outstanding, what is the NAVPS?
4.What would be the return on a $1007 investment in a mutual fund whose NAV is $20? The fund has a 2 percent front-end load and, during the holding period, $391 of fund distributions are reinvested at a NAV of $25 (no load applied to reinvestment). The fund is ultimately sold at a NAV of $24. (Round to the nearest tenth of a percent.)
*please show all the steps for calculations*
Answered Same DayNov 26, 2021

Answer To: 1. a)Rejean purchased a 13-year 4.6 percent real return bond. If investments with comparable risk...

Preeta answered on Nov 27 2021
143 Votes
1. (a) Time period = 13 years
Coupon rate = 4.6%
Assume the par value = $1,000
Return = 5%
We kn
ow, return = Annual coupon price/ purchase price
Annual coupon price = $1,000*5% = $50
0.05 = 50/Purchase price
So, purchase price = $50/$0.05
         = $ 1,000
Interest rate = (Coupon Amount/Purchase price) * 100
        = (4.6% of 1,000/1000)*100
        = 4.6%
Yield to maturity (YTM) = [(Face value / Present value)1/Time period]-1
= [(1000/1000)1/13]-1
    = 0
Bond price = C*[1-(1+r)-n/r]+[F+(1+r)n]
Where,
C = Periodic coupon payment,
= $1,000*5% = $50
F = Par value of bond
= $1,000
r = Yield to maturity (YTM)
= 0
n = No. of periods till maturity
= 13
So, r being 0, first part of the equation is zero.
So, bond price = [1000+(1+0)13]
    = $ 1,000
(b) If inflation drops, interest rate...
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