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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

User Zachelrath
by
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1 Answer

3 votes

Answer:

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 %

User Alex De Groot
by
9.2k points
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