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E.g., on 01/11/2011, I bought a single of JCP's 7.625's of '97 for 90, for a projected YTM of 8.6%. However, if a 5% inflation-rate were assumed, then the inflation-adjusted yield (aka, effective loss of purchasing-power) became an annoying -3.6% per year.

Just a quick math question: how does an 8.6% nominal yield at 5% inflation became a negative real yield? The obvious quick and dirty calculation suggests this would be +3.6%, not -3.6%.

Is it because you marked to market and the -3.6% is based on current prices rather than the 1/2011 price? Or you incorporated taxes somehow? I figure there's probably something I'm missing here.

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