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$2.$ The effect of the coupon rate and the face value of a bond

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Ivanov & Stewart Corporation issues a $20-$year bond with a fixed coupon rate of $4\%.$ Suppose, that the inflation rate over the period is $5\%.$ In $20$ years, Ivanov & Stewar because:

Inflation increases the real value of the coupon payments and the principle

Inflation increases the real value of the coupon payments, whereas the value of the principle does not change

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