Suppose that you buy a 1 -year maturity bond with a coupon of 7% paid annually. If

Question:

Suppose that you buy a 1 -year bond with a of 7% paid annually. If you buy the bond at its face value, what real rate of return will you earn if the inflation rate is
a. 4%?
b. 6%?
c. 8%?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...