If the Annual Real Rate on a 10-Year Inflation-Protected Bond

question 67

Multiple Choice

If the annual real rate on a 10-year inflation-protected bond equals 1.9 percent and the annual nominal rate of return on a 10-year bond without inflation protection is 4.4 percent, what average rate of inflation over the ten years would make holders of inflation-protected bonds and holders of bonds without inflation protection equally well off?

• A)1.9 percent
• B)2.5 percent
• C)4.4 percent
• D)6.3 percent

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