Explore BrainMass
Share

# Yield Rate on a Year Corporate Bond Explanation

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

You read in the Wall Street Journal that a 30 day T-bill currently is yielding 8%. Your brother in law, a broker for Madoff Investments has given you the following estimates of current interest rate premiums.

Based on these data, what is the real risk free rate of return?
What is the yield on a one year corporate bond with a \$1000 face value that pays a 12% annual dividend if it was purchased for \$950 and held until maturity?
If you require a 20% yield on a one year corporate bond with a \$1000 face value and a 12% annual premium what is the most you should be willing to pay for this bond?

#### Solution Preview

Yield Rate on a Year Corporate Bond Explanation
You read in the Wall Street Journal that a 30 day T-bill currently is yielding 8%. Your brother in law, a broker for Madoff Investments has given you the following estimates of current interest rate premiums.

Based on these data, what is the real risk free rate of return?
The real risk free rate of return for a 30 day T-bill is 8% because T-bill does not have any premium as ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what is the real risk free rate of return.

\$2.19