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A six-year government bond makes annual coupon payments of 4% and offers a yield of 8% annually compounded

#### A six-year government bond makes annual coupon payments of 4% and offers a yield of 8% annually compounded

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A six-year government bond makes annual coupon payments of 4% and offers a yield of 8% annually compounded. Suppose that one year later the bond still yields 8%. The face value of the bond is £1000. What return has the bondholder earned over the 12-month period?

**3.09%**

**4..91%**

**11.09%**

**8.0%**

Question 7

A gilt maturing one year from today offers an expected real rate of return of 2.25%. If inflation is expected to be 2.2% over the same year what is the nominal rate of return on the bond? (Give your answer to two decimal places).

**2.25%**

**0.50%**

**4.50%**

**2.55%**

Question 8

Dean is an investment analyst, who has just completed a review of a project. The project has a payback period of 5 years, a discounted payback of 4 years, a negative NPV and positive IRR. Which of the following statements is most likely accurate regarding this project?

**It is possible to have a negative NPV, positive IRR but not a discounted payback period shorter than a payback period.**

**It is not possible to have negative NPV and positive IRR.**

**It is possible to have a negative NPV, positive IRR and a discounted payback period shorter than a payback period.**

**It is possible to have a negative NPV, positive IRR and but the discounted payback period and a payback period cannot be different.**