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Business, 01.10.2019 16:10 oct316mb

Suppose that you buy a tips (inflation-indexed) bond with a 1-year maturity and a coupon of 7% paid annually. assume you buy the bond at its face value of $1,000, and the inflation rate is 8%.

(a) what will be your cash flow at the end of the year?
(b) what will be your real return?
(c) what will be your nominal return?

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