Suppose You Bought A$1,000 Face Value Bond with a 5

question 51

Multiple Choice

Suppose you bought a$1,000 face value bond with a 5 percent coupon one year ago for $1,020.The bond sells today for $986.If the inflation rate last year was 2.3 percent, what was your total real rate of return on this investment?

• A).02 percent
• B)-.71 percent
• C).31 percent
• D).89 percent
• E)-.48 percent

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the point where supply equals demand in a market.

Roses

Flowers known for their beauty and aromatic qualities, often symbolizing love and affection in many cultures.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total welfare gains from trade.

Trade

The exchange of goods and services between people or entities, typically within and across national borders.