Multiple choice

1-If the current inflation rate is 4.2% and you are earning a real rate of return on an investment of 3.8%, then the nominal rate on this investment is closest to: 

 3.8% 

 4.2% 

 8.0% 

 8.2% 

2-If an investment providing a nominal return of 12.25% only offers a real rate of return of 5.70%, then the inflation rate is closest to: 

5.70% 

6.20% 

6.55% 

12.25 

3-Suppose a five- year bond with a 7% coupon rate and semiannual compounding is trading for a price of $951.58. Expressed as an APR with semiannual compounding, this bonds yield to maturity (YTM) is closest to: 

7.0% 

7.5% 

7.8% 

8.2% 

4- Use the following information to answer the question(s) below. A default-free security has an annual coupon rate of 3.25% and sells for par. This bond will mature in: 

1 year 

2 years 

3 years 

4 years