You Just Bought a Bond with a Yield to Maturity

question 110

Multiple Choice

You just bought a bond with a yield to maturity of 9.5%.If the rate of inflation is expected to be 4%,what is the real return on your investment?

• A) 9.50%
• B) 5.29%
• C) 4.00%
• D) Not enough information.

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Definitions:

Income Statement

A financial statement that shows a company's revenues, expenses, and profit over a specific period.

Cost Principle

An accounting principle that requires assets, liabilities, equity, and expenses to be recorded at their original cost.

Market Value

The market's current rate for transactions involving the purchase or sale of an asset or service.

Appraisal

The process of professionally estimating the value of a property, often used for taxation or sale purposes.