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Business, 17.09.2021 14:00 nallaico585

Consider these long-term investment data: ∙ The price of a 10-year $100 par value zero-coupon inflation-indexed bond is $84.49.
∙ A real-estate property is expected to yield 2% per quarter (nominal) with a SD of the
(effective) quarterly rate of 10%.
a. Compute the annual rate of return on the real (i. e., inflation-indexed) bond.
b. Compute the continuously compounded annual risk premium on the real-estate
investment.
c. Use the formula in footnote 17 and Excel’s Solver or Goal Seek to find the standard deviation of the continuously compounded annual excess return on the real-estate investment.
d. What is the probability of loss or shortfall after 10 years?


Consider these long-term investment data:

∙ The price of a 10-year $100 par value zero-coupon inf

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