Exercise.Bond.3.1

Question 10: Bond Returns

A bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,100. 

a)      If the 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?