Suppose Baa-rated bonds currently yield 7.8%, while Aa-rated bonds yield 5.8%. N

Question

Suppose Baa-rated bonds currently yield 7.8%, while Aa-rated bonds yield 5.8%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.2%. What would happen to the confidence index? (Round your answers to 4 decimal places.)

Suppose Baa-rated bonds currently yield 7.8%, while Aa-rated bonds yield 5.8%. Now suppose that due to an increase in the expected inflation rate, the yields on both bonds increase by 1.2%. What would happen to the confidence index? (Round your answers to 4 decimal places.)

Explanation / Answer

Suppose Baa-rated bonds currently yield 7.8%, while Aa-rated bonds yield 5.8%. N

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