Choosing between buying and selling interest

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State whether you agree or disagree with the following statement. Explain why.

"You expect inflation over the next year to be 4%, while the market's consensus expectation is 2%. You also agree with the market's consensus expectation that the required real rate of return will not change over the next year. To capitalize on your expectation, you should be selling (as opposed to buying) interest rate (i.e., Treasury bond) futures."

(Note: You are only choosing between buying and selling interest rate futures; you are not considering other investments.)

Reference no: EM131721775

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