What real rate of return will you earn

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Problem - Suppose that you buy a 1-year maturity bond for $1,000 that will pay you $1,000 plus a coupon payment of $40 at the end of the year.

a. What real rate of return will you earn if the inflation rate is 2 percent?

b. What real rate of return will you earn if the inflation rate is 4.4 percent?

c. What real rate of return will you earn if the inflation rate is 5 percent?

d. What real rate of return will you earn if the inflation rate is 8 percent?

Reference no: EM133032276

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