11.1 The bond price at the end of the year is $1,050. Therefore, the capital gain on each bond is $1,050 $1,020 = $30. Your dollar return is the sum of the income from the bond, $80, plus the capital gain, $30, or $110. The rate of return is Income plus capital gain _ 80+30 Original price =.108, or 10.8% 1,020 Real rate of return is 1+nominal return 1+ inflation rate 1.108 1.04 -1=.065, or 6.5%