A Real Return Bond Has a Coupon Rate of 2

question 79

Multiple Choice

A real return bond has a coupon rate of 2.5% with an initial principal of $10,000. Since issuance, the economy has been experiencing a 2% inflation over a whole-year period. This bond has semi-annual coupon payments.


-How much will be the first coupon payment?

• A) $250
• B) $125
• C) $62.50
• D) $500
• E) $200

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Definitions:

Estuary

A partially enclosed coastal body of water with one or more rivers or streams flowing into it, and with a free connection to the open sea.

Epilimnion

The upper layer of water in a stratified lake, which is warm and well-oxygenated during the summer.

Hypolimnion

The cooler, deeper layer of water in a stratified lake, lying below the warmer, upper epilimnion layer and not mixing with it.

Large Herbivores

Big plant-eating animals that feed predominantly or exclusively on vegetation, such as elephants, giraffes, and bison.