Question: Suppose that a 6 percent annual pay Government of Canada bond

Suppose that a 6-percent, annual-pay, Government of Canada bond that matures in two years has a yield to maturity of 6.75 percent. If inflation is expected to be 2.5 percent per year over the next two years, what coupon rate would you expect to find on a Real Return Bond that is otherwise identical?

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  • CreatedFebruary 25, 2015
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