A man bought a 5% tax-free municipal bond. It cost $1000 and will pay $50 interest each year for 20.

A man bought a 5% tax-free municipal bond. It cost $1000 and will pay $50 interest each year for 20 years. At maturity the bond returns the original $1000.

(a) If there is 2% annual inflation, what real rate of return will the investor receive?

(b) What ethical questions are linked to governments issuing negative interest rate bonds?