The article titled Risk of Ultra-Low Yields includes the following information: Low yields mean that more and more of the value of a bond is in the big lump sum investors get when the bonds mature, making prices more volatile. This is because the payment of that lump sum may be many years away, making the bond's value sensitive to assumptions about interest rates. That has made long-maturity bonds, such as 10-year or longer paper, even riskier than in the past. For a one-percentage point rise in yields, 10-year U.S. Treasury holders now face a drop in price of nearly nine percentage points, versus around seven under more normal yield assumptions. Moreover, given where yields are, there is more room for them to rise than fall, meaning losses are more likely. The benchmark 10-year Treasury was yielding around 1.95% on Friday [when the article was written], only a sliver more than inflation, which is running at 1.7%. If yields were to return to more normal levels of around 4%, investors would see the price of the bond fall from 97.15 on Friday to around 81, a fall of more than 16%, a huge hit for an asset many see as super safe.

if the yield to maturity on the bond is currently 1.95% and inflation remains at its current rate of 1.7% annually over the term of the bond, then the annual real return or real interest rate or real yield of the bond would be:

1. 0.25%
2. 0.25%
3. 1.70%
4. 2.20%
5. 3.65%