If the annual real rate on a 10-year inflation-protected bond equals 1.9 percent and the annual nominal rate of return on a 10-year bond without inflation protection is 4.4 percent, what average rate of inflation over the ten years would make holders of inflation-protected bonds and holders of bonds without inflation protection equally well off?

A. 6.3 percent
B. 2.5 percent
C. 1.9 percent
D. 4.4 percent


Answer: B

Economics

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