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Basic Question 1 of 10
The real risk-free rate is 0.75%. Average inflation over the next year is 2%. Investors require 1.5% for future inflation uncertainty. What would be the price of a default-free bond with a face value of $1,000 and one full year to maturity?
B. $973
C. $959
A. $988
B. $973
C. $959
User Contributed Comments 1
| User | Comment |
|---|---|
| davidt87 | feel like its worth stating that it's a zero-coupon bond |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain how the phase of the business cycle affects credit spreads and the performance of credit-sensitive fixed-income instruments;
explain how the characteristics of the markets for a company's products affect the company's credit quality;
CFA® 2025 Level II Curriculum, Volume 6, Module 37.