(b)You purchase the $110 bond today and sell it off next year at $108. What is its one-year rate of return (assume the bond’s coupon rate is 5% and its face value is $100)? If the expected inflation...

(b)You purchase the $110 bond today and sell it off next year at $108. What is its one-year rate of return (assume the bond’s coupon rate is 5% and its face value is $100)?

If the expected inflation over the course of the year is 2%, what would the ex-ante real rate of return be for the bond on part (b)?