If a Bond's Coupon Adjusts to Pay a Constant Real

question 104

Multiple Choice

If a bond's coupon adjusts to pay a constant real rate of return,then an increase in inflation would cause

• A) the nominal coupon payment to rise.
• B) the nominal coupon payment to fall.
• C) the nominal coupon payment to remain unchanged.
• D) the bond's price to fluctuate wildly.

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