Question
Suppose that you buy a two year 7.1%bond at its face value. a-1. What will be your total nominal return over the two years if
Suppose that you buy a two year 7.1%bond at its face value.
a-1. What will be your total nominal return over the two years if inflation is 2.1% in the first year and 4.1% in the second? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Nominal return____%
a-2. What will be your total real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Real return____%
Now suppose that the bond is a TIPS. What will be vour total 2-vear real and nominal returns? (Do not round intermediate calculations)
real return ___%
nominal return___%
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