Problem:
You bought one of Rocky Mountain Manufacturing Co.'s 9 percent coupon bonds one year ago for $1,049.80. These bonds make annual payments and mature seven years from now. Suppose that you decide to sell your bonds today, when the required return on the bonds is 8.50 percent.
Required:
If the inflation rate was 4.4 percent over the past year, what would be your total real return on investment?
Note: Provide support for your rationale.