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You Are Considering Purchasing a $1,000 Bond with a Coupon

Question 2

Essay

You are considering purchasing a $1,000 bond with a coupon rate of 9.5%, interest payable annually. If the
current inflation rate is 4% per year, which will continue in the foreseeable future, what would be the real rate
of return if you sold the bond at $1,080 after 2 years?

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