A. An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,100. If the AT&T bond has a yield to maturity of 8 percent 1 year from now, what will its price be?
b. What will be the rate of return on the bond?
c. If the inflation rate during the year is 3 percent, what is the real rate of return on the bond?
One year from now, there would be 9 years to maturity. The price of a bond is the present value of the interest and the principal. The interest amount is $80. Since interest is an annuity, the PV can be found using the ...
The solution explains the calculation of bond returns and the real rate of return on the bond.