If an investor purchases a 3%, 5-year bond at its par value of $1,000 and the CPI increases 3% over each of the next 5 years, what will be the real value of the principal at maturity?
A)$1,000.00
B)$1,030.00
C)$1,060.90
D)$1,061.36

Question

Quizplus · Accepted Answer

The real value of the principal at maturity remains $1,000 because the bond is purchased at par value and the principal does not adjust for inflation.

If an Investor Purchases a 3%, 5-Year Bond at Its