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You will receive $100 from a zero-coupon savings bond in 2 years. The nominal interest rate is 8.70%. a. What is the present value of

You will receive $100 from a zero-coupon savings bond in 2 years. The nominal interest rate is 8.70%.

a. What is the present value of the proceeds from the bond?

b. If the inflation rate over the next few years is expected to be 3.70%, what will the real value of the $100 payoff be in terms of todays dollars?

c. What is the real interest rate?

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