A Real Return Bond Has a Coupon Rate of 2

question 12

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 interest does the bond pay during the second payment?

• A) $125.00
• B) $63.75
• C) $127.50
• D) $50.50
• E) $250.00

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