Question 10 The Irish Government issued an 2-year index-linked bond on 1st December 2018 which was redeemed on 1st December 2020. Each bond had a nominal coupon rate of 3% per annum, payable half yearly in arrears, and a nominal redemption price of 105%. The actual coupon and redemption payments were indexed by reference to the value of the Irish Consumer Price Index (CPI) with a time lag of 8 months. The values of the consumer price index in the relevant months were: Date 15 April 2018 14 October 2018 16 April 2019 19 October 2019 15 April 2020 CPI 123.5 125.4 130.1 132.3 139.7 An investor purchased 10,000 nominal of the bond at the issue date and held it until it was redeemed. The issue price was 115 per 100 nominal. Show that the annual effective real yield achieved by the investor on this investment was 4.42%