Assume One Investor Bought a 10-Year Inflation-Protected Bond with a Fixed

Multiple Choice

Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5% and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2%.If inflation over the 10-year period averaged 3%, which investor earned a higher real return?

A) The investor who purchased the inflation protected bond.
B) The investor who purchased the bond without inflation protection.
C) Both investors earned the same real return.
D) Neither investor earned a positive real return.