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A bond pays $10,000 per year for the next 10 years. The bond costs $90,000 now. Inflation is expected to be 6 percent over the next 10 years. Answer parts (a) and (b) a. What is the current dollar internal rate of return? Use linear interpolation with x, = 1.95% and x2 = 2.00% to find your answer. The current dollar internal rate of return is (Type an integer or decimal rounded to two decimal places as needed.) percent b. What is the real internal rate of return? The real internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.)

A bond pays $10,000 per year for the next 10 years. The bond costs $90,000 now. Inflation is expected to be 6 percent over the next 10 years. Answer parts (a) and (b) a. What is the current dollar internal rate of return? Use linear interpolation with x, = 1.95% and x2 = 2.00% to find your answer. The current dollar internal rate of return is (Type an integer or decimal rounded to two decimal places as needed.) percent b. What is the real internal rate of return? The real internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 17P
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A bond pays $10,000 per year for the next 10 years. The bond costs $90,000 now. Inflation is expected to be 6 percent over the next 10 years. Answer parts (a) and (b). a. What is the current dollar internal rate of return? Use linear interpolation with x, = 1.95% and x, = 2.00% to find your answer. The current dollar internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.) b. What is the real internal rate of return? The real internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.)
Transcribed Image Text:A bond pays $10,000 per year for the next 10 years. The bond costs $90,000 now. Inflation is expected to be 6 percent over the next 10 years. Answer parts (a) and (b). a. What is the current dollar internal rate of return? Use linear interpolation with x, = 1.95% and x, = 2.00% to find your answer. The current dollar internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.) b. What is the real internal rate of return? The real internal rate of return is percent. (Type an integer or decimal rounded to two decimal places as needed.)
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