Suppose that you buy a two-year 8.9% bond at its face value.   a-1. What will be your total nominal return over the two years if inflation is 3.9% in the first year and 5.9% in the second? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)           a-2. What will be your total real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Suppose that you buy a two-year 8.9% bond at its face value.

 

a-1. What will be your total nominal return over the two years if inflation is 3.9% in the first year and 5.9% in the second? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

 

 

 

 

a-2. What will be your total real return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

 

 

 

 

 

b. Now suppose that the bond is a TIPS. What will be your total 2-year real and nominal returns? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

 

 
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