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An investor who is not liable to tax had the choice of purchasing two investments made on 1 Apr 2 0 1 8 . (
An investor who is not liable to tax had the choice of purchasing two investments made on Apr
A A year bond of a nominal of B bearing a halfyearly coupon of per annum and redeemable at par. The issue price was at
B A year index linked bond at a price of B per B nominal, bearing a halfyearly coupon of per annum and redeemable at par. The CPI base figure for indexing is and the CPI figure applicable to the next coupon payable on Oct is Here is the CPI index on Apr
Assume that CPI will grow at a rate of per annum from its latest known value of on Apr
a Calculate the real rate of return yield per annum earned on both investments A and B
b Determine which of the two investments yielded the highest real rate of return per annum.
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