Face value of a government bond with coupon rate 11% is $1000. The bond will mature in
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Question:
Face value of a government bond with coupon rate 11% is $1000. The bond will mature in 5 years from now. The bond is currently selling for $1030. Will you purchase the bond if your required rate of return is 12% (assume annual coupon payment)? What is the implied real interest rate if the expected inflation rate is 5% per annum?
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