Suppose that you buy a 1-year maturity bond for $1,000 that will pay you $1,000 plus a

Question:

Suppose that you buy a 1-year maturity bond for $1,000 that will pay you $1,000 plus a coupon payment of $60 at the end of the year. What real rate of return will you earn if the inflation rate is

a. 2%?

b. 4%?

c. 6%?

d. 8%?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...

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