Expected inflation compare the change in the price of bond

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Reference no: EM131325039

18 year old zero coupon Bond has Au of 6% through a series of unfortunate circumstances except inflation rises from 2% to 3%

a) assuming the nominal yield Rises by an amount equal to the rise is expected inflation compare the change in the price of the bond.

b ) suppose that expected inflation is still 2% but the probability that it will move to 3% has Rising describe the consequences for the price of the bar

Reference no: EM131325039

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