What will be your real and nominal returns

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Reference no: EM132004387

Suppose that you buy a two-year 7.5% bond at its face value.

a-1. What will be your nominal return over the two years if inflation is 2.5% in the first year and 4.5% in the second? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Nominal return %

a-2. What will be your real return? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Real return %

b. Suppose that the bond is a TIPS. What will be your real and nominal returns? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Real return %

Nominal return %

Reference no: EM132004387

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