Suppose You Bought an Inflation-Indexed Security for $12,000 in January

question 13

Multiple Choice

Suppose you bought an inflation-indexed security for $12,000 in January 2013 which pays an annual interest of 4 percent.If the value of the inflation index in January 2013 was 106 and its value in January 2014 was 105, what is the value of the inflation-adjusted principal?

• A)$12,114.29
• B)​$11,342.58
• C)​$8,000.60
• D)​$13,126.41

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