Question

During a period of severe inflation, a bond offered a nominal HPR of 83% per year. The inflation rate was 74% per year. a. What was the real HPR on the bond over the year

Answer 1

real HPR is 5.17 %

Step-by-step explanation:

given data

nominal HPR = 83%

inflation rate = 74%

to find out

What was the real HPR on the bond over the year

solution

we find real interest rate r that is express as

r =
`(R-i)/(1+i)` .........................1

here R is nominal rate and i is inflation rate

so put here value

r =
`(0.83-0.74)/(1+0.74)`

r =
`(0.09)/(1.74)`

r = 0.05172

so real HPR is 5.17 %