Explore BrainMass

Explore BrainMass

    Bond returns

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:25 pm ad1c9bdddf

    Solution Preview

    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 ...

    Solution Summary

    The solution explains the calculation of bond returns and the real rate of return on the bond.