Suppose that you buy a two-year 7.3% bond at its face value.
a-1. What will be yourtotal nominal return over the two years if inflation is 2.3% in the first year and 4.3% in the second?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
a-2. What will be yourtotal real return?(Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
b. Now suppose that the bond is a TIPS. What will be yourtotal 2-year real and nominal returns?(Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
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