Assume one investor bought a 10-year inflation-protected bond with a fixed annual real rate of 1.5 percent and another investor bought a 10-year bond without inflation protection with a nominal annual return of 4.2 percent. If inflation over the 10-year period averaged 3 percent, which investor earned a higher real return?
A. The investor who purchased the inflation protected bond.
B. Neither investor earned a positive real return.
C. Both investors earned the same real return.
D. The investor who purchased the bond without inflation protection.
Answer: A
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