The rate of return on CBO government bonds during the past year is 6.0%. The inflation rate during the past year is 2.8%. The real risk free rate of return is Select one: O a. None of these O b. 1.0311 c. 25% d. 3.11% e. 1.25

The rate of return on CBO government bonds during the past year is 6.0%. The inflation rate during the past year is 2.8%. The real risk free rate of return is Select one: O a. None of these O b. 1.0311 c. 25% d. 3.11% e. 1.25

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 18P

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Concept explainers

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.

Question

The rate of return on CBO government bonds during the past year is 6.0%.
The inflation rate during the past year is 2.8%.
The real risk free rate of return is
Select one:
O a. None of these
O b. 1.0311
O c. 25%
O d. 3.11%
e. 1.25

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