Help: calculating bond profit

Merku

I wouldnt normally ask for help because i like to found out things by myself but i feel completely out of my depth here and pretty desesperate at this stage.
I have been looking at this for days and cannot even find a website to point me in the right direction.

I am doing this reports on Bonds (Government and Corporate) for a college project. I have done my research and i think i now have a fair idea on the terms, how it works, where you buy them, etc... but when it comes to do figures for an example taking all the factors into account, i am totally stuck.

For example, I have €1,000,000 which i want to invest in a government bond.
It matures in 5years time, the price (% of face value) is 108.422, the coupon rate 4.5%, Yield to maturity is 2.658%, the broker fee is 0.5% and the rate of inflation is 1.9%.
What should be my profit when the bond matures taking inflation into account and deducting fee and taxes?

It's putting the inflation rate into the equation that's confusing me the most.

Any kind of help would be very much appreciated!

roro2

You presumably use the inflation rate as your discount rate to compare cash flows in different periods. e.g. 1,000 in year 0 = 1,000/1.019 = 981 in year 1. It's not a great question though as the inflation rate isn't a good indicator of the discount rate, and it sounds like you are being asked to calculate a "real" (inflation-adjusted return).

Basically, work out your cash flows in each year. Discount them to a common time period using the inflation rate/discount factor, and add up.