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A 10-year bond has a par value of $1,000 and a coupon rate of 5 percent

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A 10-year bond has a par value of $1,000 and a coupon rate of 5 percent. During the first six months after the bond was issued, the inflation rate was 1.3 percent. By how

much does the principal of the bond

increase? What is the coupon payment

after six months?

Option 1

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