Suppose that you buy a two-year 8% bond at its face value. a. What will be your

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Suppose that you buy a two-year 8% bond at its face value.

a. What will be your nominal return over the two years if inflation is 3% in the first year and 5% in the second? What will be your real return?

b. Now suppose that the bond is a TIPS. What will be your real and nominal returns?

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Principles of Corporate Finance

ISBN: 978-0077404895

10th Edition

Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen

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Question Posted: Dec 31, 2012 10:30 AM

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Suppose that you buy a two-year 8% bond at its face value. a. What will be your

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a Your nominal return will be1082 1 1664 over the tw...View the full answer

Principles of Corporate Finance

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