Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 8, Problem 13QAP
Summary Introduction
Introduction: The real
To calculate: The real rate of return.
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Say you own an asset that had a total return last year of 11.5 percent. If the inflation rate
last year was 6.5 percent, what was your real return? (Do not round intermediate
calculations and enter your answer as a percent rounded to 2 decimal places, e.g.,
32.16.)
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Suppose you own an investment that had a total nominal return of 10.7% last year. If the inflation rate last year was 3.7%, what was your real return (in percent)? (Hint - think of economist Irving Fisher, how would Fisher have answered this question by doing an exact calculation?). . .
Say you own an asset that had a total return last year of 10.4 percent. If the inflation rate last year was 4.3 percent, what was your real return?
Chapter 8 Solutions
Corporate Finance
Ch. 8 - Prob. 1CQCh. 8 - Prob. 2CQCh. 8 - Prob. 3CQCh. 8 - Yield to Maturity Treasury bid and ask quotes are...Ch. 8 - Coupon Rate How does a bond issuer decide on the...Ch. 8 - Real and Nominal Returns Are there any...Ch. 8 - Prob. 7CQCh. 8 - Prob. 8CQCh. 8 - Term Structure What is the difference between the...Ch. 8 - Crossover Bonds Looking back at the crossover...
Ch. 8 - Municipal Bonds Why is it that municipal bonds are...Ch. 8 - Prob. 12CQCh. 8 - Treasury Market Take a look back at Figure 8.4....Ch. 8 - Prob. 14CQCh. 8 - Bonds as Equity The 100-year bonds we discussed in...Ch. 8 - Bond Prices versus Yields a. What is the...Ch. 8 - Interest Rate Risk All else being the same, which...Ch. 8 - Prob. 1QAPCh. 8 - Prob. 2QAPCh. 8 - Prob. 3QAPCh. 8 - Prob. 4QAPCh. 8 - Prob. 5QAPCh. 8 - Prob. 6QAPCh. 8 - Prob. 7QAPCh. 8 - Prob. 8QAPCh. 8 - Prob. 9QAPCh. 8 - Prob. 10QAPCh. 8 - Prob. 11QAPCh. 8 - Prob. 12QAPCh. 8 - Prob. 13QAPCh. 8 - Prob. 14QAPCh. 8 - Prob. 15QAPCh. 8 - Prob. 16QAPCh. 8 - Prob. 17QAPCh. 8 - Prob. 18QAPCh. 8 - Prob. 19QAPCh. 8 - Prob. 20QAPCh. 8 - Prob. 21QAPCh. 8 - Prob. 22QAPCh. 8 - Prob. 23QAPCh. 8 - Prob. 24QAPCh. 8 - Prob. 25QAPCh. 8 - Prob. 26QAPCh. 8 - Prob. 27QAPCh. 8 - Prob. 28QAPCh. 8 - Prob. 29QAPCh. 8 - Prob. 30QAPCh. 8 - Prob. 31QAPCh. 8 - Prob. 32QAPCh. 8 - Prob. 33QAPCh. 8 - Prob. 34QAPCh. 8 - Prob. 35QAPCh. 8 - Prob. 1MCCh. 8 - Prob. 3MCCh. 8 - Prob. 5MCCh. 8 - Prob. 6MCCh. 8 - Prob. 7MC
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Similar questions
- Say you own an asset that had a total return last year of 17 percent. Assume the inflation rate last year was 4.8 percent. What was your real return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)arrow_forwardYou know that the stated rate of return is not what you really earned. If the inflation rate last year was 4.5%, and your investment had a stated rate of 18%, what was your real return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Real return %arrow_forwardYour business manager forwards the following information to you. Your businesses earned a real rate of return of 7.6% last year and inflation for the same period was 9.6%. What was your nominal rate of return using the Fisher Effect? (Note: nominal rates of return can be positive or negative.) (Round to 100th of a percent and enter as a percentage, e.g. 12.34% as 12.34.)arrow_forward
- An investor earned 12% last year, a year when actual inflation was 9% and was expected to have been 6%. What was the investor's realized rate of return?arrow_forwardAn investment had a nominal return of 11.2 percent last year. If the real return on investment was only 7.5 percent, what was the inflation rate for the year?arrow_forwardAn investment offers a total return of 13.8 percent over the coming year. You believe the total real return will be only 9.4 percent. What do you believe the exact inflation rate will be for the next year? Please show how to solve this by using Excel, thank you.arrow_forward
- What is the (exact) nominal return on an investment that earns a real return of 14.7% while inflation is 7.4%? Enter your response, in percent (%), correct to TWO decimal places.arrow_forwardAn investment had a nominal return of 10.6percent last year. If the real return on investment was only 6.3 percent, what was the inflation rate for the year? a. 17.57% b. 3.89% c. 10.73% d. 4.49%arrow_forwardNominal rate of return is 10.80%. Inflation rate is 6.95%. What is the real rate of return as per Fisher equation? a) 4.80% b) 17.75% c) 6.95% d) 3.60%arrow_forward
- ok Assume the returns from holding an asset are normally distributed. Also assume the average annual return for holding the asset a period of time was 15.4 percent and the standard deviation of this asset for the period was 33.3 percent. Use the NORMDIST function in Excel to answer the following questions. a. What is the approximate probability that your money will double in value in a single year? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 3 decimal places, e.g., 32.161. b. What is the approximate probability that your money will triple in value in a single year? Note: Do not round intermediate calculations and enter your answer as a percent rounded to 8 decimal places, e.g., 32.16161616. ences a. Probability b. Probability % %arrow_forwarda) You invest 155 000 TL for a year. At the end the year, you have 174 375 TL net in your account. If the inflation realizes at %10 fot this year, calculate real rate of return? Can real interest rates be negative? Give a simple example?arrow_forwardYou buy a stock for $20. After a year the price rises to $25 but falls back to $20 at the end of the second year. What was the average percentage return and what was the true annualized return?arrow_forward
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