Macroeconomics 15th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 14

Suppose you purchase a $5,000 bond that pays 7 percent interest annually and matures in five years. If the inflation rate in recent years has been steady at 3 percent annually, what is the estimated real rate of interest If the inflation rate during the next five years is 6 percent, what will happen to your real rate of return