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Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 6% paid annually. Assume you buy the bond at

Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 6% paid annually. Assume you buy the bond at its face value of $1,000, and the inflation rate is 8%.

a. What will be your cash flow at the end of the year?

b. What will be your real return?

c. What will be your nominal return?

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