Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of...

Suppose that you buy a TIPS (inflation-indexed) bond with a 1-year maturity and a coupon of 5% paid annually. Assume you buy the bond at its face value of $1,000, and the inflation rate is 10%.

a. What will be your cash flow at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. What will be your real return?

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

Expert Solution

jeff jeffy answered 2 months ago

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