Share
Explore BrainMass

Total real return

Calculating Investment Return You bought one of Bergen Manufacturing Co.'s 8% coupon bonds one year ago for $1,028.50. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7%. If the inflation rate was 4.8% over the past year, what would be your total real return on the investment?

Solution Preview

Please see the attached file.

Calculating Investment Return You bought one of Bergen Manufacturing Co.'s 8% cupon bonds one year ago for $1,028.50. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7%. If the inflation rate was 4.8% over the past year, what would be your total real return on the investment?

Step 1: Calculate the price of the bond now

To calculate the price of the bond ...

Solution Summary

Solution calculates total real return on the investment in bonds.

$2.19