Your Albanian treasury bond pays interest annually and has a yield to maturity of 10.00 percent....
Your Albanian treasury bond pays interest annually and has a yield to maturity of 10.00 percent. The annual inflation rate is 4 percent. What is the (annual) real rate of return on this bond?
A) 4.00%
B) 14.00%
C) 5.77%
D) 2.50%
E) 1.06%
Homework Answers
real rate of return=(1+yield to maturity)/(1+inflation rate)-1
=(1+0.1)/(1+0.04)-1
=(1.1/1.04)-1
which is equal to
=5.77%(Approx).
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