What will be your total 2-year real and nominal returns

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Reference no: EM132003116

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

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

(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Nominal return _____ %

What will be your real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Real return _____ %

Now suppose that the bond is a TIPS. What will be your total 2-year real and nominal returns?

(Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Real return _____ % Nominal return _____ %

Reference no: EM132003116

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