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Jack,

Due to how you've priced those bonds, you've pre-determined the winner and loser. Or, to say it another way, you're comparing apples and pears.

Cpn Price Due YTM
0.05 110 4/1/2021 3.8%
0.04 100 4/1/2021 4.0%

Re-price the first bond to 108.200, so that its YTM is also 4.00%. Then do the discounting. My guess, without running the numbers, is the loss-results are a wash. But give me a couple of minutes, and I'll confirm that (or not) under a wider range of inflation-rates.

Charlie
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