CAN SOMEONE EXPLAIN THIS TO ME I DONT UNDERSTAND. THE INFORMATION BELOW IS THE ACTUAL solution. I need answers to what this is a step by step process. WHy is 80+30 used

where did 1.1078/1.04 come from etc.

220 Exactly one year ago, you bought a standard bond with 15-ycars left to matunty for $1,020. Its annual coupon is 8%. Today the price of the bond has increased to $1,050. Assuming * 4% inflation rate, what are the nominal and real rates of return for this bond for the year? Nominal rate of return =(Interest earned + capital gain) purchase price 80 +301 1,020 = 10.78% 1 Real Rate of Return * 1+ Nominal rate of return/1+Inflation Rate 1.1078/1.041.0652 Real rate of return -6.52%