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imagine that in a given economy the prevailing inflation is equal to 3% and investors expect to earn a real return of 5%. The government
imagine that in a given economy the prevailing inflation is equal to 3% and investors expect to earn a real return of 5%. The government plans to issue inflation protected securities (bonds) with the face value equal to 1000 to mature in 20 years. What is the value of the coupon that such a security should offer to be attractive for investors?
A) 20
B) 80
C) 50
D) None of the above
I would like to know the math process please. Thanks
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