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You invest in the 5-year Treasury STRIP (so no coupon payments) with an annual effective yield (EY) of 2.09%. Assume you hold the bond until
You invest in the 5-year Treasury STRIP (so no coupon payments) with an annual effective yield (EY) of 2.09%. Assume you hold the bond until maturity, so your holding period return is the same as the effective yield. After five-years the actual annual inflation rate turned out to be 1.82%. What is your realized real rate of return? Hint: Use the holding period return as your nominal return/interest rate.
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