You bought one of Mastadon Manufacturing Co.’s 8.4 percent coupon bonds one year ago for $1,048. These bonds make annual payments, mature eleven years from now, and have a par value of $1,000. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent.
If the inflation rate was 2.6 percent over the past year, what would be your total real return on the investment?