Problem:
You bought one of Great White Shark Repellant Co.%u2019s 8.4 percent coupon bonds one year ago for $1,048. These bonds make annual payments and mature 11 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent.
Required:
Question: If the inflation rate was 2.6 percent over the past year, what was your total real return on investment?
Note: Provide support for your underlying principle.