A one year bond pays intrest for $1000 at the end of the year and the face value of 10k. Inflation during the year is expected to be 5%. The tax rate 25%. Assume relevant intrest rate for this type of intrument is %10.

a) Determine price of the bond

b) What is the expected before-tax real intrest rate of the bond?

c) What is the expected after tax real intrest rate of the bond?

d) If inflation turned out to be 6%, what was the actual( or realized) after tax real intrest rate of this bond?

e) Assumig that inflation was 6%, what fraction of the real intrest income was paid as taxes in real terms?