What will be your real return

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Reference no: EM13730858

Suppose that you buy a two-year 8.1% bond at its face value.

a-1) What will be your nominal return over the two years if inflation is 3.1% in the first year and 5.1% in the second?

a-2) What will be your real return?

b) Now suppose that the bond is a TIPS. What will be your real and nominal return?

Reference no: EM13730858

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