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Question on nominal and real returns

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Nominal and real returns

Suppose that you buy a two-year 8% bond at its face value.

a. What will be your total nominal return over the two years if inflation is 3% in the first year and 5% in the second? What will be your total real return?

b. Now suppose that the bond is a TIPS. What will be your total two-year real and nominal returns?

Reference no: EM133001669

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